Coordinated Rate Cuts
Following the lead of the 
Federal Reserve, central banks around the world announced rate cuts designed to lift the global economy in the face of a recession. The Fed slashed rates to 1.5%, while the Bank of England cut its rates to 4.50%, and the European Central Bank cut rates by half a point to 3.75%. Swiss, Canadian, Chinese, and Swedish banks also announced rate cuts. The Bank of England also stated that inflation was likely to rise to 5.0% in the near future but would decline as soon as lower oil prices and the Immense UK bailout take effect in the real economy. The UK bailout also allows for the partial nationalization of troubled banks.
Cuts Fail to Calm Investors
The cuts failed to calm investors in volatile markets and most world markets saw losses despite the rate cuts. The actions of American and European banks appear to be part of a global strategy that uses aggressive monetary policy and taxpayer recapitalization of ailing banks, generating cautious optimism among economic analysts. Said Jim O’Neill, chief global economist at Goldman Sachs, “The gravity of the times requires out-of-the box responses. Atop of all the other things we have seen this week, it gives me great confidence.”
The gravity of the world economic situation is cause for concern among forex traders and investors both large and small.
