In a unanimous decision, the Federal Reserve lowered its federal funds target, which governs the rate banks charge each other for overnight loans, by half a percentage point, to 1.5%. The European Central Bank, the Bank of England, the Swedish Riksbank, the Bank of Canada and the Swiss National Bank joined in cutting their rates by half a percentage point.
The Federal Reserve also lowered its discount rate by half a percentage point, to 1.75%. The discount rate is the rate at which the Fed lends directly to banks and financial-services companies.
The Fed has cut the federal funds rate eight times since last September.
Joint Statement By Central Banks
Throughout the current financial crisis, central banks have engaged in continuous close consultation and have cooperated in unprecedented joint actions such as the provision of liquidity to reduce strains in financial markets.
Inflationary pressures have started to moderate in a number of countries, partly reflecting a marked decline in energy and other commodity prices. Inflation expectations are diminishing and remain anchored to price stability. The recent intensification of the financial crisis has augmented the downside risks to growth and thus has diminished further the upside risks to price stability.
Some easing of global monetary conditions is therefore warranted. Accordingly, the Bank of Canada, the Bank of England, the European Central Bank, the Federal Reserve, Sveriges Riksbank, and the Swiss National Bank are today announcing reductions in policy interest rates. The Bank of Japan expresses its strong support of these policy actions.
Excerpt From Fed Press Release
Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months. Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit. Inflation has been high, but the Committee believes that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation.
The Committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability.
See Full Report.