Saturday, 20 December 2008

Back to ZIRP

Well, almost. Bloomberg reports the BoJ's decision on Friday.

The Bank of Japan cut its benchmark interest rate to 0.1 percent, increased purchases of government debt and announced plans to buy commercial paper for the first time as the deepening recession starves companies of funds.

Governor Masaaki Shirakawa and his colleagues lowered the target for the overnight lending rate from 0.3 percent, the central bank said in a statement today in Tokyo, a decision that was predicted by futures traders after the Federal Reserve reduced U.S. rates this week. Government bonds rallied on the plan to buy more debt.

Friday also saw a surprise cut from Denmark. Bloomberg reports:

The Danish central bank unexpectedly reduced its benchmark interest rate by half a percentage point to weaken the krone and defend its peg against the euro.

The lending rate was cut to 3.75 percent, Copenhagen-based Nationalbanken said in a statement today. The bank uses policy to target a krone rate of 7.46038 to the euro, meaning policymakers change rates when currency swings require, rather than holding scheduled meetings.

The Fed has practically no more room for rate cuts but that doesn't mean there won't be any more easing. Bloomberg reports the latest Fed move.

The Federal Reserve revised its $200 billion program aimed at reviving credit to consumers and small businesses, extending the term of loans to three years from one year.

Under the Term Asset-Backed Securities Loan Facility, or TALF, the Fed will also loan to all eligible borrowers rather than through an auction process, the central bank said today in a statement in Washington. The change is designed “to provide more certain investor access,” the Fed said.

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