European banks cut prime rates: Too little, too late!
Today's Financial News - Posted November 6, 2008
The Bank of England and the European Central Bank slashed their respective interest rates. The Bank of England cut the rate by a huge 1.5 percentage points, the ECB remained true to its timid self by cutting a mere 0.5 percent.
by J. Christoph Amberger
Baltimore — (TFN): The European central bankers did something uncharacteristic today. They abandoned tilting at the windmills of inflation and tried to to stimulate the economy. Better late than never. But not much better:
The Bank of England and the European Central Bank slashed their respective interest rates. The Bank of England cut the rate by a huge 1.5 percentage points, the ECB remained true to its timid self by cutting a mere 0.5 percent.
Of course, even an ECB rate at 3.25 percent will make no difference to the duration and depth of the recession. Rates could hit 2.5 percent or lower, and it will do nothing to fuel domestic consumer spending: The IMF today predicted that the German economy will shrink by 0.8 percent in 2009. Make that -1.5%, and we’ll be getting warmer.
That’s bad for the euro and good for the dollar. But what’s good for the dollar will be bad for U.S. exports and manufacturing. Which is bad for the U.S. economy… bad for oil and commodities… and bad for gold. Which in turn is good for the dollar.
We have entered a self-supporting downward cycle that will take years to break.
It’s what the markets are expecting: After an Election Day rally that came out of nowhere, the global markets are again plunging for the second day straight.
We better get used to it!
Next Article: With earnings like this, is Genesee & Wyoming Inc. (GWR) a good buy again?
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