US. Federal Reserve and Global Central Banks Cut Interest Rates

The Federal Reserve and the Central Banks of Canada, England, China, Sweden, Switzerland, and teh European Union all cut rates by .5%. The banks are coordinating efforts, and attempting to avert a global economic meltdown. Japan is expected to follow suit, and states that they support the move.

"The recent intensification of the financial crisis has augmented the downside risks to growth," the Fed said in explaining the coordinated action.

But analysts were cautious about the impact of the central banks' coordinated action.

"At first blush, while this is an big step, it is unlikely to prove sufficient to stem the rot. Additional rate cuts are likely and further measures to inject liquidity and re-capitalize banks are needed," said Marc Chandler, global head of currency strategy at the investment firm Brown Brothers Harriman.

The rate cuts came against a backdrop of increasing anxiety in global financial markets. Investors have been fleeing shares on worries that neither the Fed, nor other central banks, could move fast enough to stop the rising turmoil.

In earlier trading Wednesday, European stocks fell about 5 percent and Asian stock indexes skidded more than 8 percent. Japan's stock market plummeted 9.4 percent — its biggest one-day drop in 21 years. Trading on both Russian stock markets was suspended — on one until Friday and the other until further notice — after shares plunged within the first hour of trading.

The worldwide gloom follows a sell-off in U.S. markets late Tuesday, where major stock indexes slid 5 percent. The rout brought the Dow Jones industrials' losses to more than 875 points in two days, and its close was the lowest close in five years. The blue chip index is now a stunning 33.3 percent below its record close of 14,164.53 a year ago.

The Fed's action Wednesday was the latest in a long series of actions over the last several weeks that the Fed has taken in coordination with other federal agencies, Congress and the White House to shore up a financial industry stung by bad loans, mounting losses and — in many cases — collapse. President Bush signed a $700 billion financial bailout bill into law on Friday.

Even with the unprecedented $700 billion financial bailout plan, the failing economy and the jobs market probably will get worse. Many believe the economy will jolt into reverse later this year — if it hasn't already_ and will stay sickly well into next year.

One of the most crucial pillars of the economy — the jobs market — has cracked, and wage growth is slowing. This means that consumers will be even more hard-pressed to spend in the fashion that helps grow the economy.

Increasingly skittish employers slashed payrolls by 159,000 in September, the most in more than five years. A staggering 760,000 jobs have disappeared so far this year. The unemployment rate is 6.1 percent, up sharply from 4.7 percent a year ago.

The unemployment rate could hit 7 or 7.5 percent by late 2009. If that happens, it would mark the highest rate of joblessness since the months immediately following the 1990-91 recession. Some economists say the jobless rate could rise even more before the situation starts to get better.

Mounting job losses, shrinking paychecks, shriveling nest eggs and rising foreclosures all have weighed heavily on American voters, who will be electing a new president in about four weeks. The economy is their No. 1 concern, polls have shown.

The crisis was only mentioned in passing by the presidential candidates in a debate Tuesday night.