Fed leads global coordinated rate cut

By Glenn Somerville

WASHINGTON (Reuters) - The U.S. Federal Reserve led a coordinated round of official rate cuts on Wednesday, easing by a half percentage-point along with the European Central Bank, Bank of England, Switzerland, Canada and Sweden. In an attempt to stem unprecedented global market turmoil, the Fed cut its key federal funds lending rate by half a percentage point to 1.5 percent and lowered its discount rate by the same amount to 1.75 percent.

The ECB also cut by a half-point to 3.75 percent as did the Bank of England, taking its rate to 4.5 percent.

China cut its key rate 27 basis points and its reserve requirements for banks by half a percentage point.

The Bank of Japan, with rates at just 0.5 percent, did not ease but the Fed said the BOJ expressed its strong support for the coordinated policy action.

"Incoming economic data suggests that the pace of economic activity has slowed markedly in recent months," the Fed said in a statement.

"Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit."

Market reaction was surprisingly muted with stock markets only trimming deep losses in response.

MSCI's benchmark world index was down 2 percent compared with losses of 2.9 percent when the cuts were announced. The pan-European FTSEurofirst 300 was down 1.4 percent some 10 minutes after the move compared with losses of around 3.8 percent beforehand.