INSTANT VIEW: Fed leads global coordinated rate cut

NEW YORK (Reuters) - The U.S. Federal Reserve led a coordinated round of global official rate cuts on Wednesday, easing by a half-point, as did the European Central Bank, Bank of England and Swiss, Canadian and Swedish banks.

In an attempt to stem unprecedented global market turmoil, the Fed cut its key federal funds lending rate by half a percentage point to 1.5 percent and also lowered its discount rate by the same amount to 1.75 percent.

The ECB also cut by a half-point to 3.75 percent as did the Bank of England, taking its rate to 4.5 percent.

KEY POINTS: * US Federal Reserve says cutting Fed funds rate 1/2 percentage point to 1.5 percent * Fed says acting in coordination with ECB and Central Banks in Canada, UK, Sweden, Switzerland * Fed says acting because of growing evidence of weaker economic activity, reduced inflation pressure * Fed says intensifying financial market turmoil likely to further restrain spending * Fed says also cutting discount rate by 1/2 point to 1.75 percent

COMMENTS:

MIKE HOLLAND, CHAIRMAN OF HOLLAND & CO, IN NEW YORK

"I did hear a clamor yesterday around the world for a coordinated action exactly like the one we just had.

"I think it's a brilliant example of the U.S. Federal Reserve leading a coordinated effort to do anything that's in its power to cure the ills of the financial system around the world."

MICHAEL FARR, PRESIDENT, FARR, MILLER & WASHINGTON IN WASHINGTON, D.C.

"This is good news. It's another volley of what are supposed to be silver bullets.

"Will it hold? That's the question.

"(The Fed) has more in its arsenal. They have $700 billion that we haven't seen yet.

"I also think that the U.S. markets are already beginning to see other monies coming in to the dollar ... the dollar is becoming a safe haven again."

KLAUS SCHRUEFER, ECONOMIST AT SEB BANK, FRANKFURT

"It's an important step for the central banks to show that they're actively moving to combat the financial crisis. The central banks have previously made a number of cash injections, but these were obviously not enough to rebuild trust among the banks. We'll probably see further interest rate cuts in the next few months, because inflation is continuing to ease."

FRANK GEILFUSS, MARKET ANALYST, LOEBBECKE INVESTMENT

"Short term the rate reduction is a good thing, long term it probably won't have giant effect.

"It is a good sign that international monetary bodies have moved in a concerted effort, which shows this type of action is possible and may whet investors appetites for more action in the future.

"We are seeing a bit of movement into financials from other stocks, especially cyclicals and pharma, as the rate drop should ease money constraints for banks. This movement, however, will likely be a day-trading phenomena and probably will not be longer-lasting."

MARC CHANDLER, CURRENCY STRATEGIST AT BROWN BROTHERS HARRIMAN

"At first blush, while this is an big step, it is unlikely to prove sufficient to stem the rot. Additional rate cuts are likely and further measures to inject liquidity and recapitalize banks are needed.

"The currency markets remain hyper-volatile, but we would look for the U.S. dollar to recover against the euro and sterling, but continue to struggle against the yen -- where the BOJ is the only major central bank not to participate in the coordinated move."

TOBIAS JUST, REAL ESTATE ECONOMIST, DEUTSCHE BANK

"It is somewhat easing the pain, but this will not flip the world upside down.

"This is not helping the real estate market out of its troubles, but (it is helping) the financial sector and so, indirectly, real estate.

"There will be some partial stimulus for real estate but I guess it will not be dramatic because we will not see long-term interest rates fall to the same extent (as short-term rates)."

DENNIS NACKEN, CAPITAL MARKET ANALYST, ALLIANZ GLOBAL INVESTORS

"This shows that all participants act in concert. They know about how dramatic the situation is and act against it. This is for the good of the banks. But the mutual confidence of investors and banks, which see each other in a skeptical way at the moment, is not going to come back at once. This will take time.

"This coordinated rate cut does not guarantee that the granting of loans among the banks will gain momentum. The insecurity and the crisis of confidence remains."

PAUL NIVEN, HEAD OF ASSET ALLOCATION AT F&C ASSET MANAGEMENT

"It's been talked about in recent days and expectation had been building that there would be some form of coordinated action, so in that sense it was not a huge surprise. We were expecting the Bank of England to cut rates by 50 basis points this week albeit the expectation was tomorrow.

"What the authorities are trying to do is stabilize the situation in credit and money markets. The fact that it's a coordinated response is intended to give reassurance to investors that authorities are willing to do what is required to manage the slowdown.

"Rate cuts will only help to alleviate the pain ... there's going to be more. Authorities are trying to get ahead of the curve in terms of this action."

DAVID FROST, DIRECTOR-GENERAL, BRITISH CHAMBERS OF COMMERCE

"We are thrilled that the Bank of England has taken this bold and necessary step.

"The economy has been facing an emergency, and the MPC could not afford to wait. This cut will, for now, steady the markets and inject much needed confidence.

"Alleviating the dangers of a major downturn must be the overriding priority for the MPC right now. Over the next four months, interest rates must be cut to four percent as a minimum."

MEHERNOSH ENGINEER, CREDIT STRATEGIST, BNP PARIBAS, LONDON

"What is more important than the rate cuts is what the UK Treasury did today, which is to provide capital to the weak banks.

"But the rate cuts will facilitate things in good time, it may prevent us from going into depression and keep us in a recession."

ALAN CLARKE, UK ECONOMIST, BNP PARIBAS:

"We believe the next move will be another 50-basis-point cut at the November (Bank of England) meeting. Past experience of the Bank of England (BoE) cutting at this pace supports this assumption. In 1998, the BoE cut by 50, 50, 25, 50 over the space of four months. We believe the conditions are in place for another 50bp cut next month.

"Our forecast for the end point for interest rates is 3 percent to be reached before mid-year. That is 200bp over the space of around 7 months -- broadly in line with the pace associated with past episodes of sharp rate reductions.

"Although the Bank acknowledged inflation is still high, in discussing the risks, the Bank noted that there is a risk that a sharp slowdown in the economy, associated with weak real income growth and the tightening in the supply of credit, pulls inflation materially below the target. In addition that risks to inflation in the medium term has shifted decisively to the downside."