Fed, major central banks slash rates

LONDON (MarketWatch) -- The U.S. Federal Reserve, the Bank of England, the European Central Bank and other major central banks all moved to slash key interest rates Wednesday as they struggle to head off global financial turmoil that has threatened to throttle world economic growth.

In coordinated announcements, the Fed said it had cut its key lending rate by a half point to 1.5%.

In similar moves, the Frankfurt-based European Central Bank trimmed its key refi rate to 3.75% from 4.25%, while the Bank of England cut its key rate to 4.5% from 5%.

"Incoming economic data suggest that the pace of economic activity has slowed markedly in recent months," the Fed said, in a statement. "Moreover, the intensification of financial market turmoil is likely to exert additional restraint on spending, partly by further reducing the ability of households and businesses to obtain credit."

The Bank of Canada, the Swedish Riksbank and the Swiss National Bank also cut rates. The Bank of Japan didn't join in the coordinated move.

The Fed said that while inflation has been high, the rate-setting Federal Open Market Committee believed that the decline in energy and other commodity prices and the weaker prospects for economic activity have reduced the upside risks to inflation.

The Fed also approved a 50 basis point cut in the discount rate to 1.75%.