Rate cut gets chilly reception in U.K.
In London, banks are reacting to the Fed cut with lower interbank lending rates, but they're still reluctant to lend. Stephen Beard reports markets will look to Barack Obama's fiscal packages for help out of the slump
The Bank of England in central London (Shaun Curry/AFP/Getty Images)
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TEXT OF STORY
Steve Chiotakis: Just like some winter thermometers, the Fed funds rate is low this morning. Between zero and a quarter of a percent. Ironically, the decision to slash the rate was one that the Fed hopes will thaw the frozen credit market.
It's certainly getting a somewhat chilly overseas reaction so far. The dollar has fallen sharply against foreign currencies this morning. We get the latest from Stephen Beard in London.
Stephen Beard: The message from the London money markets today is this: the Credit Crunch continues. The banks are still reluctant to lend. The rate at which they are prepared to lend dollars to each other has moved lower this morning, but not by enough. While the FED's short-term target interest rate is close zero, London's interbank rate is still more than 1.5 percent.
David Buik is with the money brokers BGC. He says the markets are now looking to Barack Obama to take office and stop the U.S. from sliding into a major slump:
David Buik: We expect that during the course of 2009, he will introduce fiscal packages probably totalling a trillion dollars, and coupled with the cut in interest rates then I think it will have the right effect.
He says the Europeans have been slower to tackle the crisis….and so Europe may take longer to recover than the United States.
In London, this is Stephen Beard for Marketplace.
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