United kingdom Daily news: Central banks take action on slump fears

Kamis, 05 Juli 2012

Central banks take action on slump fears

Central banks take action on slump fears

By Daily Mail Reporter

PUBLISHED: 16:20 EST, 5 July 2012 | UPDATED: 16:20 EST, 5 July 2012

Rising concerns of a worldwide slump led central banks in China, the eurozone and Britain to loosen monetary policy.

First to move was the Peopleâ€™s Bank of China, by lopping a quarter point off interest rates for the second time this year.

It was followed by the UKâ€™s Monetary Policy Committee that announced it would be adding to its asset purchases by printing another Â£50bn of money bringing total levels of quantitative easing up to Â£375bn.

Chinese rate cut: Beijing is rattled

The final move came from the European Central Bank that cut a quarter point off its key interest rate, lowering it to 0.75pc, the lowest level since the euro was formed in 1999.

The cut triggered a sale of the single currency that fell 1pc against the dollar and 0.68pc against the pound.

The Chinese rate cut suggests Beijing has become increasingly rattled by the slowdown in the economy and is seeking to stimulate demand for credit.

All eyes in the markets today will be on the American jobless numbers amid hopes that the momentum in reducing unemployment, after the disappointing 69,000 jobs gained in May, can be restored.

Much of the focus of global policymakers remains on the weak outlook for the euroland economy. Confidence will not be helped by the latest bond auction in Spain that saw the yield on ten year borrowing costs climb to 6.43pc up from 6.04pc at the last auction on June 7.

Analysts noted that while Spain is still able to sell debt the task is becoming ever more difficult despite the Â£80bn bailout being approved for the banking sector by the European Council.

The continued tension in the eurozone, that has contributed to 18 months of flat output in Britain, was among the reasons that the Bank of England opted for another round of quantitative easing.