'Race to Zero' Under Way as Central Banks Cut Rates

With Fed at 1% and European, Asian banks trimming, no-interest loans not far off, perhaps
By Clay Dillow,  Newser Staff
Posted Nov 7, 2008 12:25 PM CST
US Fed Chaiman Ben Bernanke is leading the race to zero, cutting rates to 1% in an effort to get credit flowing again.   (AP Photo)
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(Newser) – Interest rates around the world are falling, with no end in sight as central banks hack away at obstacles to lending and try to jump-start their economies, Bloomberg reports. With the US rate at 1%, the Bank of England yesterday cut its key figure to 3%, the lowest since 1955, and the European Central Bank cut its rate by half a point, to 3.25%.

“It’s the race to zero,” one London economist said. “There’s no obstacle to more rate cuts.” As the crisis deepens, free money is becoming a more realistic possibility across the globe. A combination of reluctant spenders and cautious banks has created unparalleled stagnation; central banks hope deeper cuts convince banks to pass lower rates on to consumers.