The Bank of Canada cut rates again on Tuesday. Reuters reports:
The Bank of Canada cut its main interest rate to a record low on Tuesday and signaled for the first time that it may take extra steps to pump money into a system that remains stubbornly short of credit.
The central bank reduced its key overnight rate by a half point to 0.5 percent, as expected, for a cumulative reduction of 400 basis points since December 2007.
Somewhat surprisingly, however, the Reserve Bank of Australia left interest rates unchanged. From Bloomberg on Tuesday:
The nation’s currency surged after Governor Glenn Stevens kept the overnight cash rate target at 3.25 percent in Sydney today...
“The Australian economy has not experienced the sort of large contraction seen elsewhere,” Stevens said in a statement. The bank’s rate cuts and government spending will provide “significant support” to the economy, he said.
A bold move and statement. Today from Bloomberg:
Australia’s economy unexpectedly shrank in the fourth quarter for the first time in eight years as exports and housing slumped, increasing pressure on the central bank to resume cutting interest rates.
Gross domestic product fell 0.5 percent from the third quarter, when it increased 0.1 percent, the Bureau of Statistics said in Sydney today. The median estimate of 23 economists surveyed by Bloomberg News was for 0.2 percent growth...
Traders forecast a 72 percent chance of a half-point reduction in the central bank’s benchmark rate when policy makers meet next on April 7, a Credit Suisse Index based on swaps trading showed at 1:36 p.m. in Sydney today.
In contrast, there has been no reluctance on the part of the Federal Reserve to cutting rates. In fact, it has gone well beyond rate cuts in fighting the credit crisis. On Tuesday, it launched the Term Asset-Backed Securities Loan Facility, the latest in a string of initiatives to alleviate the credit crunch. Bloomberg reports:
The Federal Reserve said its $1 trillion program to prop up the market for auto and business loans will start disbursing funds March 25 and will probably accept securities backed by vehicle-fleet and equipment leases.
The Fed also lowered interest rates and so-called collateral haircuts for loans tied to asset-backed securities with guarantees by the Small Business Administration or to government- guaranteed student loans, the central bank and U.S. Treasury said in a statement in Washington.