US Fed and Major World Central Banks Coordinate Rate Cut

Major world central banks react to a broadening global economic crisis by taking extraordinary measures to coordinate monetary policy. In a move to reduce growing stress in the world credit markets central banks cut interest rates by a 0.5 percent.

This coordinated effort by the US Federal Reserve, Bank of England, European Central Bank, Canada, Switzerland, Sweden, and even the People's Bank of China reflects the growing realization that globalization has deeply linked our independent economies.

Actions and reactions are increasingly directly and immediately impacting our respective markets. This realization has been no clearer than watching the market trading patterns following the clock from Asia, European, and into North America over the last few weeks. Watching these international trading exchanges, the closing marks are an eerie forecast of the impending fate of each new market opening.

The Federal Reserve, in a unanimous decision, lowered the Fed funds rate from 2.0 percent to 1.5 percent. Likewise, a similar reduction was made in the discount rate.

In a statement released with the rate decision the Fed said they reacted to increasingly weakening economic condition and were no longer immediately concerned with inflationary pressure. The weight of this decision was reflected in statements earlier in the week where Dallas Fed President Richard Fisher, a notorious inflationary hawk, said "market dysfunction trumps inflation." Dallas Fed President Fisher has been a frequent dissenter in past Fed decisions to leave rates at current levels, advocating Fed rate increases.

In this same Federal Reserve statement, the Fed stated that it has been and will continue to be in close consultation with major world central banks to monitor ongoing economic conditions.

Early indications are that the markets are reacting positively and with increased confidence over the move as broad European market indexes bounced up at the news.