Moving aggressively if not yet effectively to mitigate the worst effects of a global recession, European central banks unleashed sweeping rate cuts on Thursday. The Bank of England cut its key rate by a full percentage point to 2%, its lowest level since the bank was established in 1694. The European central bank made the largest rate cut in its near 10-year history, lowering its key rate by 0.75 percentage points to 2.5%.
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But credit markets remain icy. The three-month London interbank offered rate, or LIBOR, stood at 2.19% on Thursday, down from 2.20% the day before. Yet the spread between LIBOR and anticipated central bank rates, the closely watched OIS spread, was 189 basis points, signaling that banks are still not lending to each other. - Barbara Rudolph
