Australia rate cut stuns, markets thirst for more

Australia stunned markets with its steepest interest cut in 16 years on Tuesday sparking belief among that investors that major global central banks could now choreograph a coordinated set of rate cuts. The Reserve Bank of Australia’s 100 basis point reduction was twice as big as expected, underscoring the belief that increasingly strong financial medicine is now needed, as talk about coordinated rate cuts surfaced in Europe.

Only the Bank of Japan bucked the trend, signalling it may not join any campaign of rate cuts to contain the raging crisis which has put the world’s financial system in greater peril than at any time since the 1930s Great Depression.

“I think it is important to coordinate in everything,” said ECB policy maker and head of the Spanish central bank Miguel Angel Fernandez Ordonez. “Now the problem is global, it is important to coordinate in absolutely everything.”