What the Pros Say: We Need Rate Cuts
Job Losses to Speed Up
"If the TARP (Troubled Asset Relief Program) proposal had gone ahead, the hope would have been that when we pass the end of the quarter, maybe we could have seen some semblance of normality (in the money markets). But that's clearly not the case now," Ken Wattret from BNP Paribas said.
"Businesses are going to change their behavior, given the uncertainty and the increased cost of funding and worries about the state of the global economy. They will be reining back on their hiring. We'll see a bigger increase in the pace of job losses."
Cuts No Panacea
"The major problem is still liquidity, in particular the liquidity when it goes from the central bank to arrive at the commercial banks' balance sheets because simply commercial banks don't exchange liquidity anymore or exchange it at a very high interest rates or very high margins," David Kohl from Julius Baer said.
"The main task for the central banks is to provide the liquidity to certain institutions which need it, to do actually some fine tuning at the markets. Interest-rate cuts wouldn't particularly help, as interest rates in the money market are well ahead of the current target rates of the central bank."