UK Bailout
On Wednesday Britain announced a 1.23 trillion dollar rescue package that included part nationalization of eight of Britain’s largest banks. Immediately after the UK bailout was announced the Bank of England announced an interest rate cot of 0.5%. The US Federal Reserve bank also announced rate cuts reducing its rates from 2% to 1.5%. As part of the $1.23 trillion rescue package, the British Government said it would invest pound stg. 150 billion ($364.3 billion) directly into banks, establish a pound stg. 200billion special liquidity fund and guarantee pound stg. 250 billion of bank-to-bank loans. During the global financial crisis many investors are seeking the safe haven of the dollar which remains strong and continues to offer Forex opportunity on global currency markets.
The IMF Weighs In
The move was designed to prevent the banking and credit crisis from reaching the real economy. The move did not prevent a decline on the London exchange which fell 6.5% but recovered by the end of the day posting a decline of only 2%. On Wall Street the Dow opened down 2.08%. The International Monetary Fund cut its world growth projections to 3% and predicted growth of industrialized countries to near zero warning that it could fall even further. Developing countries are expected to maintain ‘reasonable’ growth levels. The IMF still believes the world will avoid a recession but warned of increasing risks.
