NEWS - World Coordination Rate Reduction Oct 9th

Bernanke’s Push for Global Cut Began With Trichet, King Talks - By Scott Lanman (Bloomberg)

Oct. 9 - Federal Reserve Chairman Ben S. Bernanke’s push for the broadest coordinated interest-rate cut in history started with a weekend of telephone conversations with Jean-Claude Trichet and Mervyn King.

Calling from his Washington office on Oct. 4 and Oct. 5, Bernanke broached the idea with Trichet, the European Central Bank president, and King, the Bank of England governor. The talks culminated Oct. 7 in a conference call where they privately hammered out details of the unprecedented move. Also on the line were central bank chiefs in Canada and Japan.

Twenty-four hours later, the plan came to fruition when policy makers announced half-point reductions aimed at easing the financial crisis. Bernanke’s work behind the scenes over those four days illustrates that the ties he’s forged with counterparts abroad are helping decisions keep pace with changing economic fortunes.

Ninety minutes earlier, the Dow Jones Industrial Average had ended down 5.1 percent for the day, the fifth straight day of losses. Yesterday’s move represents closer coordination among central banks than the rate cut in the aftermath of the 2001 terrorist attacks, when a half-point reduction by the Fed was later followed by the ECB, Canada, Switzerland and Sweden.

Yesterday, it was the Fed, the ECB, the Bank of England, Bank of Canada and Sweden’s Riksbank reducing their benchmark rates by half a percentage point. The Bank of Japan supported the action, Switzerland also took part and China’s central bank separately cut its key rate 0.27 percentage point.

Not all central bankers have been keen to cut rates in recent months. Until last week the ECB had been focused on returning inflation below its 2 percent limit with Trichet arguing as recently as mid-September that his economy was in a temporary “trough."