Central banks ease rates most since '09

Written by Bloomberg | Washington | Updated: Nov 29 2011, 07:22am hrs
Central banks across five continents are undertaking the broadest reduction in borrowing costs since 2009 to avert a global economic slump stemming from Europes sovereign-debt turmoil.

The US, the UK and nine other nations, along with the European Central Bank, have bolstered monetary stimulus in the past three months. Six more countries, including Mexico and Sweden, probably will cut benchmark interest rates by the end of March, JPMorgan Chase & Co forecasts.

With national leaders unable to increase spending or cut taxes, policy makers including Australias Glenn Stevens and Israels Stanley Fischer are seeking to cushion their economies from Europes crisis and US unemployment stuck near 9%. Brazil and India are among countries where easing or forgoing higher interest rates runs the risk of exacerbating inflation already higher than desired levels.

Weve seen central banks that were hawkish begin to turn dovish against a backdrop of austerity in fiscal policy, said Eric Stein, who co-manages the $6.6-billion Eaton Vance Global Macro Absolute Return Fund in Boston. You could debate how bad it will be for growth, but it cant be good, he said of the challenges facing the world economy.