LONDON (MarketWatch) -- The world's major central banks moved in concert Wednesday to slash key interest rates, easing monetary policy around the globe in an ongoing struggle to head off financial turmoil that has threatened to flatten the international economy.
The coordinated rate moves saw the Fed cut its key lending rate by half a percentage point, to 1.5%.
The 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%. The Bank of Japan sat out the move but issued a statement backing the action.
The Bank of Canada, the Swiss National Bank and the Swedish Riksbank cut rates as well.
European equity markets, which had been facing another day of intense selling, rebounded from lows, but the snapback proved short-lived. A rally in U.S. stock futures also fizzled. See full story.
"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."
Economists welcomed the action, but they said it wouldn't be enough on its own to remedy a deepening and severe financial crisis.
"The move is to be applauded, but there is more to come," said Ian Shepherdson, chief U.S. economist at High Frequency Economics in Valhalla, N.Y. "The playbook to avoid depressions says rates need to be as close to zero as possible, banks have to be rescued, public spending has to rise and free trade must be maintained."
The Fed move was unanimously approved by the rate-setting Federal Open Market Committee. And its statement indicated the Fed stands ready to move again whenever warranted: "The committee will monitor economic and financial developments carefully and will act as needed to promote sustainable economic growth and price stability." See full statement.
Coordinated rate moves are extremely rare. Some economists had anticipated such action, however, warning that mounting financial turmoil threatened to turn a likely global economic slump into a historically deep downturn.
The Fed also approved a half-point cut in the discount rate, to 1.75%.
'Easy move'
The action "suggests that the authorities are now fully awake to the scale of the financial crisis in the markets," said Douglas McWilliams, chief executive of the London-based Center for Economics and Business Research.
Joshua Shapiro, chief U.S. economist at MFR Inc., said the rate cuts were a relatively "easy move to make."
"Trickier will be dealing with the ongoing need for aggressive fiscal policy measures, particularly in Europe where a central fiscal authority does not exist," he said.
The move comes on the same day the British government unveiled a plan to use as much as 50 billion pounds ($87 billion) in taxpayer money for recapitalizing some of the nation's biggest banks and stabilize the reeling financial sector. See full story.
European governments have scrambled in recent weeks to rescue a number of troubled banks, but European Union officials have struggled to come up with a unified plan to deal with failing institutions.
In the United States, the epicenter of the global crisis, President Bush last week signed into law a $700 billion financial-rescue plan that centers on the government buying up "toxic" debt.
As a result of the turmoil, banks around the world have become increasingly reluctant to lend to each other in crucial short-term money markets out of fear that borrowers could go bust. That's exacerbated problems for troubled banks and also caused other credit markets to begin drying up.
The Fed and other central banks have pumped massive amounts of liquidity into money markets and taken other major steps in an effort to alleviate tensions -- but with little lasting impact to date.
