Tuesday, October 07, 2008
Australia "Stuns" markets
But not readers here.
G20 countries are engaging in salvo after salvo of monetary warfare in an attempt to stave off the global contagion of capital flight and deposit withdrawal. It is ironic that the profits domestic banks saw as an opportunity to globalize their business has caused much more risk to their deposit base. If they experience capital flight in one jurisdiction, the entire world knows the bank is weak. Information technology has made markets able to panic much more "efficiently".
Australia slashes interest rate
By Peter Smith in Sydney
Published: October 7 2008 04:46 | Last updated: October 7 2008 07:25
Australia’s central bank stunned the market by cutting its benchmark rate by one percentage point, its largest reduction in 16 years, as evidence mounted the deepening financial crisis in the US and Europe could lead to a lengthy global downturn.
The severity of the cut, which takes the Reserve Bank of Australia’s cash rate to 6 per cent, wrong-footed economists who had predicted a 25 or 50 basis point reduction.