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Central Banks Around the World Cut Interest Rates to Bolster Economy


Central banks around the world are cutting their key interest rates in a coordinated attempt to head off a global recession.

The cuts come as the International Monetary Fund says the world economy is entering a "major downturn," and faces the "most dangerous" shock in mature financial markets since the 1930s. The U.S. Federal Reserve announced its emergency rate cut early today (Wednesday).

It said it is cutting the benchmark interest rate by half of one percent to one-point-five percent because of a marked slowdown in economic activity and a reduced threat of inflation. The European Central Bank and central banks in Britain, Canada, Switzerland, Sweden and China also said they are cutting their key rates.

Officials hope lowering interest rates will help persuade banks to resume lending money, and ease a credit crunch that makes it difficult for many businesses to operate. U.S. Treasury Secretary Henry Paulson says another effort to ease credit problems is getting under way quickly.

The government's 700 billion-dollar program to buy up bad assets from financial institutions may have experts on staff by the end of the week, and may start making purchases in a couple of weeks. REST OPT Earlier Wednesday, the rate cut got a mixed greeting by investors. Key European stock indexes fell in volatile trading, and were off five percent or more at the close. U.S. stock market indexes swung widely, and moved up around two percent in afternoon trading.

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