Brussels, 08/10/2008 (Agence Europe) - After taking numerous steps over the past few weeks to provide the money market with liquidity, the world's main central banks cooperated further on Wednesday 8 October when they agreed jointly to lower their interest rates by half a percentage point. In the euro area, the minimum bid rate on the main refinancing operations is now 3.75%, and the interest rates on the marginal lending facility and the deposit facility are 4.75% and 2.75% respectively, says a press release from the European Central Bank after a meeting of its Governing Council by means of teleconferencing.
The ECB, the Bank of Canada, the Bank of England, the Federal Reserve, the Swedish and the Swiss central banks decided to act together through the monetary policy to support the world banking system. Japan, whose main interest rate is 0.5%, expressed its strong support for this unprecedented action, which is an indication, if there was a need for such, of the scale of the crisis and the need for a global response to it. In the United States, the key interest rate is now 1.5% and in the UK 4.5%. The Chinese central bank, which did not take part in the concerted action, nevertheless followed the move by reducing its main rate for the second time in a month.
In its press release, the ECB says that inflationary pressures have begun to decrease in a number of countries, partly reflecting a marked decline in energy and other commodity prices. The recent intensification of the financial crisis has augmented the downside risks to growth and, thus, has further diminished the upside risks to price stability, the Bank goes on. It warns that it remains imperative for the euro area to avoid broad-based second-round effects in price- and wage-setting. (A.B./transl.rt)