World central banks make historic joint rate cut

By Glenn Somerville

WASHINGTON (Reuters) - Central banks around the world cut interest rates on Wednesday in their first broadly coordinated policy action in history, as fears of a deep recession banished recent worries over inflation.

In an attempt to stem the worst global financial crisis since the 1930s, the central banks of the United States, the euro zone, Britain, Switzerland, Canada and Sweden all lowered official rates by a half-percentage point.

But stock markets, traumatized by cascading losses and the collapse of some of the oldest names in banking, took only mild comfort. Strains in credit markets continued unabated, begging the question of what more policy-makers could do and whether more cuts would follow.

European Central Bank President Jean-Claude Trichet hinted at this option, pledging that markets could count on central banks to "take the appropriate decisions."

The People's Bank of China, participating for the first time in a globally coordinated interest-rate move, also lowered its key rate, but by a more modest amount.

The Bank of Japan, whose rates are just 0.5 percent, did not ease but strongly supported the coordinated action.

"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 joint statement.

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