Now the European Central Bank waffles on rate cut recovery measures
ECB President Jean Claude Trichet replaces Bernanke as not "getting" the magnitude of the global recessionary threat
Surprisingly, the UK and European Central Banks did not see fit to drop their interest rates in tandem with yesterdays's 75bp Fed rate cut, citing inflationary pressures. Coordinated action by the world's Central Banks in lowering rates to head off a global recession was expected here. After all, Bernanke made the first move yesterday.... now the ball is in Europe's court. Jon Ogg at 24/7 Wall St. explains the implications of the ECB's stubborn, but fallible position - "maybe the Central Bankers and their wives want to... come shopping in New York City before they lower rates". Notice though the dollar has remained remarkably resilient vs. the Euro today, perhaps in part with the expectation of future coordinated rate cut action.
In any case, most pundits expect European markets to suffer from this short-sighted decision, it's the principle reason why Europe fell today and is dragging the US markets lower today. Now, ECB President Jean-Claude Trichet replaces Bernanke as the roadblock to recessionary recovery.
More interesting tidbits:
- Mortgage rates fall to lowest since 2004 - as mentioned previously, mortgage rates are following the dropping T-bonds.
- Wall Street betting on another 3/4 point rate cut - sensationalistic and radical
I've been curious about how the European markets would handle our current downturn.
My friend used to say all the time,'the economy of the U.S sneezes, the whole world gets a flu'
Good update Pat.
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Frankly, the European countries would want to divorce their economies from the potential US recession. However, look at some of today's reactions from Europe:
France: After the Fed rate cut
French Finance Minister Christine Lagarde was quick to call for a lowering of the euro interest rate and if the central bankers in Frankfurt fail to respond with a rate cut, we should expect a sharp political reaction from Paris.
Zurich: ECB's Weber dismisses rate cut
"Some people obviously believe this rhetoric and that's why the euro stays supported for now,'' said Mansoor Mohi-uddin, global head of currency strategy at UBS AG in Zurich, the world's second biggest currency trader. "But the euro-zone economy won't be immune from the global economic slowdown, and the ECB will be in a rate-cutting mode by the second quarter.''
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