Central banks move to contain worsening crisis

Interest rates have been cut across the world over night in a coordinated move by central banks to counter the ever-worsening global financial crisis.

The Federal Reserve and central banks of Canada, England, Switzerland, Sweden and Europe all eased their official lending rates by 50 basis points.

In a joint statement issued by the banks yesterday they said “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.”

The initiative followed the British government’s announcement of a multibillion dollar rescue package of “specific and comprehensive measures to ensure the stability of the financial system and to protect ordinary savers, depositors, businesses and borrowers”, as the country’s financial system continues to disintegrate.

The RBA also moved to change market operation procedures for domestic banks yesterday to provide “greater flexibility” to lenders in deteriorating circumstances.

The changes included the relaxation of RMBS repurchase agreement restrictions.