Central Banks Ease Most Since ‘09 to Avert Europe-Led Slump, by Scott Lanman, Nov. 28 2011, Bloomberg News

Central banks across five continents are undertaking the broadest reduction in borrowing costs since 2009 to avert a global economic slump stemming from Europe’s sovereign-debt turmoil.
Monetary easing will push the average worldwide central bank interest rate, weighted for gross domestic product, to 1.79 percent by next June from 2.16 percent in September, the largest drop in two years, according to data and projections from JPMorgan, which tracks 31 central banks. The number of those banks loosening credit is the most since the third quarter of 2009, when 15 institutions cut rates, the data show.
Yields on 10-year French debt increased to 3.58 percent as of 3:54 p.m. London time from 2.44 percent in September. Italy’s 10-year bond yields were at 7.20 percent, up from 4.52 percent in February. German 10-year rates have declined to 2.31 percent from 3.51 percent in April even after Germany failed to get bids for 35 percent of the 10-year bonds it offered Nov. 23.
Europe’s turmoil has led Australia, Brazil, Denmark, Romania, Serbia, Israel, Indonesia, Georgia and Pakistan to reduce interest rates since late August. Chile, Mexico, Norway, Peru, Poland and Sweden are also forecast by JPMorgan Chase to lower borrowing costs by the end of the first quarter, while Australia, Brazil, Indonesia and Romania may cut rates further. Israel today lowered its main rate a second time, by 0.25 percentage point to 2.75 percent.

In the U.S., Federal Reserve Chairman Ben S. Bernanke is considering further actions to lower borrowing costs in the world’s biggest economy. He vowed in August to keep the benchmark interest rate close to zero through at least mid-2013. The central bank in September decided to replace $400 billion of short-term securities it holds with longer-term debt to reduce rates on extended-maturity debt.
Policy makers in much of the developing world, including Asia, are reluctant to ease with inflation high and the chance of economies overheating, Hensley said. Instead, they’re more likely to keep interest rates unchanged, he said.

India’s central bank has raised interest rates 13 times to 8.5 percent to control inflation that has stayed above 9 percent this year. “The central bank would prefer to hold policy interest rates steady for a prolonged period,” said Siddhartha Sanyal, chief economist for the country at Barclays Plc in Mumbai. He worked at the Reserve Bank of India from 1999 to 2007.

In China, the world’s second-largest economy, the central bank on Nov. 16 reiterated Premier Wen Jiabao’s pledge to “fine-tune” policies when needed. While inflation may continue to moderate, “the foundation for price stability is not yet solid,” the bank said in its third-quarter monetary policy report.