ZIRP around the world

The rate-slashing continues.

Swiss interest rates are moving quickly towards zero. From Bloomberg:

The Swiss central bank cut its interest rate to a four-year low of 0.5 percent and said further measures are possible as the economy faces a recession that may be the worst since 1982.

The Swiss National Bank’s Governing Board in Zurich, led by Jean-Pierre Roth, lowered the three-month Libor target by 50 basis points, matching the median of 18 estimates in a Bloomberg survey. The rate for borrowing francs for three months in London was at 1.14 percent yesterday. It fell to 0.86 percent today...

The SNB’s decision takes it closer to being the first central bank in Europe to reduce its benchmark to zero as the financial crisis saps growth across the Swiss economy...

The SNB’s options are narrowing after it also cut the one- week rate it uses to steer three-month borrowing costs to 0.05 percent from 0.1 percent.

Records are also being broken in Asian interest rate cutting. Bloomberg reports:

The Bank of Korea reduced its key rate to a record low of 3 percent from 4 percent. Taiwan’s central bank cut its benchmark by the most in 26 years to 2 percent from 2.75 percent...

Taiwan cut its rate for the fifth time in two months, as faltering exports tip the economy into recession...

South Korea’s reduction was its fourth in eight weeks.

And South Africa has decided to join the rate-cutting club. From Bloomberg:

South Africa’s central bank cut its benchmark interest rate by half a percentage point, the first reduction in more than three years, as inflation slowed and the economy grew at the weakest pace in a decade.

The repurchase rate was lowered to 11.5 percent, Governor Tito Mboweni said in a televised speech from Pretoria today. The decision was forecast by 14 of 21 economists surveyed by Bloomberg.

Falling inflation around the world has helped remove inhibitions about such aggressive monetary easing. AFP/CNA reports that China's inflation rate has plunged.

China's inflation rate dropped abruptly to a 22-month low of 2.4 per cent in November from 4.0 per cent in October, the government said Thursday, as cost increases for food and other items slowed.

Falling inflation is also apparent from US import prices, which plunged 6.7 percent in November.

However, rate cuts in the US have been mainly driven by the weakening economy, and there are few signs that the weakness is ending soon. From Bloomberg:

U.S. exports slid to a seven-month low and the number of Americans filing claims for unemployment benefits surged to the highest level since 1982, signaling the economy is shrinking even faster than previously estimated.

The export slump, caused by recessions spreading through U.S. trading partners, spurred a widening in the trade deficit to $57.2 billion in October, a Commerce Department report showed in Washington today. Initial jobless claims rose more than forecast to 573,000 in the week ended Dec. 6, the Labor Department said...

American exports dropped 2.2 percent to $151.7 billion as foreign purchases of U.S. aircraft, automobiles, chemicals and food waned...

Imports declined 1.3 percent to $208.9 billion, the lowest level since March.

Yields on government securities have fallen in response to the rate cuts and deteriorating economy. From Bloomberg:

Government debt is on pace for a sixth consecutive week of gains after the 10-year note sale attracted stronger-than- average demand and drew a yield of 2.67 percent...

The yield on the benchmark 10-year note dropped nine basis points, or 0.09 percentage point, to 2.61 percent at 5:14 p.m. in New York, according to BGCantor Market Data... The yield touched 2.505 percent on Dec. 5, the lowest level since at least 1962, when the Federal Reserve’s daily records began.

The two-year note yield fell seven basis points to 0.78 percent. It touched 0.7688 percent, the lowest level since regular sales began in 1975.

Even LIBOR is falling. From Bloomberg:

The cost of borrowing in dollars for three months in London fell to the lowest level since September 2004 on speculation the Federal Reserve will cut interest rates next week to revive an economy battered by the collapse in lending.

The London interbank offered rate, or Libor, that banks say they charge each other for such loans slid 10 basis points today to 2 percent, the biggest decline since Nov. 6, British Bankers’ Association data showed...

Today’s drop in the three-month dollar rate takes its decline in the past three days to 19 basis points. Last week, the rate fell by three basis points and the previous week it rose five basis points.