'Group of 20' Sees Need for Further Rate Cuts

The Group of 20 met over the weekend to discuss the need to “urgently” bolster global growth. The group has called upon governments to cut interest rates and increase spending as most of the world’s leading industrial nations face mounting pressures of a recession. The group stands ready to take forward the work and actions that have been agreed upon by the leaders in order to restore and maintain financial stability while supporting global growth.

China, which is currently the largest developing economy in the world, has announced a stimulus package that is worth nearly a fifth of its total output in order to enhance domestic demand. Brazil, Russia, India, and China also have planned coordinated measures to increase trade and capital inflows into their respective economies. Meanwhile, Alejandro Werner, the Mexican Deputy Finance Minister has stated that because of slower economic growth and lower commodity prices, the need to cut interest rates is becoming more justified.

The International Monetary Fund is predicting that the economies for the United Kingdom, Euro area, United States, and Japan will contract further over the next 12 months. This will be the first global recession seen since World War II.

The Bank of England, last week, lowered the key interest rate 150 basis points to three percent while the European Central Bank lowered their rates by 50 basis points twice this month. The Reserve Bank of Australia has cut two percentage points since August with their rates currently at 5.25 percent and Japan has set their rates at 0.30 percent. The Federal Reserve has lowered rates to one percent. Globally, central banks are expected to reduce borrowing costs even further in order to stimulate growth.