Central Banks Jump Into Action - ECB, BOE, China

July 5, 2012 7:49 AM EDT
The European Central Bank today announced that it would lower interest rates to 0.75 percent from 1 percent currently. The move is meant to spur growth in a region plagued with a drastic economic contraction caused by difficulties in its banking sector. Rates in Europe are now at an all time low.

The Bank of England made headlines earlier today when the bank voted to increase its asset purchase program by £50 billion to a total of £375 billion. The move is in response to tighter credit conditions due to problems in the E.U., which have threaten to weaken growth in Great Britain.

The central bank of China also cut rates today by 31 basis points and announced more relaxed rules on lending.

Relatively low inflation throughout the world has given central banks a free hand to take steps to boost growth. Many view the central banks efforts as a double edged sword. There is no doubt that easy money lift asset prices in the short term, but many worry about the longer term effects.

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