G.O.O.D

Source:  Reuters

Savers are feeling the pinch after the Bank of England made a further cut in interest rates to a historic low of 1.5 percent on Thursday.

Some high street banks had already cut rates on instant access accounts to as low as 0.1 percent, with rates of up to 4 percent only available for those prepared to lock their money up for a period of time.

Lobby groups for pensioners and the elderly called on the government to offer extra help in benefits for those trying to eke out their retirement with income from their savings.

There was also support for plans from the opposition Conservatives to cut tax on savings accounts for lower income earners.

Interest rates have fallen by 3.5 percentage points since October as policymakers pull out all the stops to revive an economy facing its first recession since 1992.

Investment firm Legal and General said the rate cuts were starting to look futile and even counter-productive.

“We have reached the point now where only the fortunate few are really benefiting and savers are really starting to suffer,” said L&G’s Mortgages Director Ben Thompson.

“What lenders need more than ever are savers’ deposits, and they are not going to get them if they can only offer paltry rates of interest.”

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Technorati Tags: Bank of England, interest rates

Source: Reuters

Sweden cut interest rates by a record 175 basis points on Thursday, prompting speculation of dramatic cuts elsewhere in Europe to try to stop a global slump spreading faster than policymakers had anticipated.

Japanese companies slashed spending, showing the economy was in a deeper recession than the government estimated, after U.S. data showed private sector employers axed jobs at the fastest pace in seven years.

“With indicators pointing to an intensifying global adjustment in employment and business spending, our forecast of the deepest four-quarter GDP slide in the developed world since World War Two appears to be on track,” JPMorgan economists said.

In a deeper than expected cut, Sweden’s central bank chopped its key interest rate by a record 175 basis points to 2.0 percent to prevent the economy sliding further into recession.

The Riksbank said it expected rates to remain at that level over the coming year. There was an “unexpectedly rapid and clear deterioration in economic activity since October,” it said.

The Reserve Bank of New Zealand sliced interest rates by a record 150 basis points to a five-year low of 5.0 percent and said it would probably have to cut rates again.

Indonesia also made a surprise cut in its key interest rate, by 25 basis points to 9.25 percent, the first since December 2007 as the government sought to protect the economy.

Britain and the European Central Bank were due to announce rate cuts later on Thursday and with Britain heading into recession, the Bank of England could slash rates to their lowest in more than half a century.

A rapid deterioration in business conditions has raised fears Britain could be heading for a much deeper downturn than anybody expected.

“They need to do something aggressive again,” said George Buckley, chief UK economist at Deutsche Bank,.

Analysts expect a 50 basis point reduction from the European Central Bank and twice as much from the Bank of England.

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Source: FT.com

Asian central banks on Thursday joined their western counterparts in co-ordinated cuts to interest rates in an effort to curb the risk of the credit crisis sparking a severe global recession.

Six of the world’s most important central banks, including the Federal Reserve, the European Central Bank and the Bank of England, on Wednesday announced unprecedented simultaneous emergency interest rate cuts of half a percentage point.

“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,” the central banks said in a statement.

Central banks in South Korea, Hong Kong and Taiwan followed their example on Thursday morning, helping Asian share markets to make cautious gains.

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Source: Reuters

Central banks around the world cut interest rates in unison on Wednesday to try to limit economic damage from the worst financial crisis in 80 years.

In an unscheduled announcement made as New York traders were reaching their offices, the Federal Reserve said it was cutting its key federal funds rate by 50 basis points to 1.5 percent.

China, the European Central Bank (ECB) and central banks in Britain, Canada, Sweden and Switzerland also cut rates in a coordinated response which investors had been demanding.

Battered shares rallied initially on the move, but European stocks then fell anew and U.S. stocks looked set to open lower as the initial euphoria evaporated.

The U.S. approved a $700 billion package last week to rescue its ailing banks but failed to rally its markets. Governments across the globe have been pushing ahead with their own emergency measures amid calls for a more coordinated approach.

The Fed set out the threat to the economy from a crisis which has redrawn the banking landscape and left many people frightened of losing their savings and their jobs.

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Read the full article at FT.com / World

Fears that Iceland could be the first country to fall victim of the global financial turmoil grew on Tuesday when its central bank abruptly increased interest rates 1.25 percentage points to 15 per cent in an attempt to restore confidence in its struggling currency and stave off a full-blown economic crisis.

The bank said “deteriorating financial conditions in global markets” had contributed to the emergency move. Confidence in the krona, Iceland’s currency, has been shattered this year because of perceived economic imbalances in the economy and fears the banking sector is in danger of collapse. The krona has weakened by 22 per cent against the euro so far this year.

Technorati Tags: Iceland, Interest Rates