Both the Bank of England (BOE) and the European Central Bank (ECB) signaled they believe their economies need further help from cheap money as they announced Thursday morning that they will be leaving interest rates low and unchanged.

The BOE left interest rates at 0.5% -- where they have been since March 2009. The ECB left interest rates at 1% -- the same level they have been at since May 2009.

As expected, there was no change Thursday in the monetary policy of two, major central banks. The European Central Bank kept is benchmark rate at a record low 1.0%, and the Bank of England kept it is rate at 0.50%.

In its statement, the ECB said it continues to see growth and inflation risks balanced. Meanwhile, in addition to maintaining its 0.50% rate, the BOE, as expected, also kept its asset purchasing plan at 200 billion pounds or $304 billion.

As expected, both the European Central Bank and the Bank of England kept their key, short-term interest rates at the same levels Thursday, in decisions that are consistent with a continued, accommodative central bank policy in the world's major economic regions.

The ECB kept its refinance rate at 1.0% and the Bank of England maintained its 0.5% rate. The Bank of England also maintained its 200 billion pound/$315 billion asset buying program at the same level.

This morning, the Bank of England's Monetary Police Committee (BOE) decided to keep its interest rate at the current all-time low of 0.5%, as was expected. The BOE announced that it would continue its 75-billion pound program, which is supposed to increase the money supply in hopes of keeping deflation at bay.

The BOE stated that, "since its previous meeting a total of just over 26 billion pounds of asset purchases had been made and that it would take a further two months to complete that program." Some experts believe the BOE will hold interest rates at 0.5% "well into 2010." Before the bank made its decision, the 10-year yield was hovering around 3.34%.

TheStreet.com's Jim Cramer says the paltry half-point cut means we're headed lower once again.

Wrong!

The European Central Bank needed to move in lock step with the Bank of England. It left us hanging with a half-point cut.

That means we're sunk again.

The near-term tug of war just got uglier. Without the ECB cutting as much as the BOE, we have no reason to buy.

Period.

Last night, in a meeting with a bunch of hedge fund managers, there was uniform agreement that the market has to be bought with huge rate cuts, that you need to ignore the near-term Cisco (NASDAQ: CSCO) (Cramer's Take) (to use the generic version of crummy earnings) and go with the Wells Fargo (NYSE: WFC) (Cramer's Take) offering that will make it so lending will come again and demand be spurred.

Two major central banks took drastic monetary policy action Thursday to further stimulate their economies. The Bank of England unexpectedly cut it benchmark interest rate by a gargantuan 150 basis points to 3%. Meanwhile, the European Central Bank cuts its key rate, the refinance rate, by 50 basis points to 3.25%.

"There has been a very marked deterioration in the outlook for economic activity at home and abroad," the Bank of England said in a statement.

Economist Richard Felson had expected a 75-basis-point cut by the BOE. "We know that several business surveys in the U.K. are pointing to a pronounced contraction, with consumer spending showing little life. I think those facts, and the tighter credit markets, prompted the decision," Felson said. "Few expected as large a cut, but it was the correct move, and there's likely to be additional rate cuts ahead."

The BOE has now cut interest rates by 200 basis points since October 8.

The ECB also took bold action to stimulate growth, with a 50-basis point cut. Felson said continental Europe is likely to experience the effects of the downturns in consumer and business demand later, but the fact that the hawkish-leaning ECB "is in full accommodation mode" is a sign of the scope of the economic slowdown.

The U.S. Federal Reserve is leading an unprecedented effort by major central banks to push dollars into the global financial system, the Fed announced Monday, backstopping government fiscal policies to restore confidence,

The European Central Bank, Bank of England, and the Swiss Central Bank, will offer unlimited dollar fund auctions with maturities of seven days, 28 days, and 84 days at a fixed interest rate. The Bank of Japan may offer similar measures, the Fed said.

The Fed added that "central banks will continue to work together and are prepared to take whatever measures are necessary to provide sufficient liquidity in short-term funding markets."

Dollar falls on increased currency supply

The dollar fell early Monday against the world's other major currencies on the news, as traders adjusted positions to the increased supply of dollars. The dollar fell one half cent to $1.3615 versus the euro, 1.5 cents to $1.7286 versus the British pound and one-third yen to 100.37 versus Japan's yen.

Economist Richard Felson told BloggingStocks Monday the major central banks' effort is clear: keep financial markets adequately supplied with dollars amid a world that's hoarding dollars.

"It's one of the paradoxes of this current global financial crisis that despite the fact that the crisis originated in the United States, banks and financial institutions around the world are hoarding dollars. The reason is the dollar is still the world's reserve currency and investors are engaging in a flight to safety. The consequence has been a credit crunch," Felson said. "The central banks' policy should help alleviate that crunch by ensuring that there's adequate dollar liquidity. It's the correct move."

A debate on 'How much money does the Fed have?' is premature, several economists told BloggingStocks Monday.

Instead Fed policymakers, in conjunction with the U.S. Treasury, and major central banks in industrialized economies, should and will focus on the huge task at hand: using traditional and new tools to stabilize the financial system. Investors/traders should concentrate on that, as well, the economists say.

'Fight the fire, now; worry about water costs, later'

"Questions regarding the ultimate size of the Fed's resources are not appropriate at this juncture, in my view," Economist David H. Wang said. "The immediate task is to prevent a panic, a panic that could cause this financial crisis to turn into a financial calamity."

"The Fed, ECB [European Central Bank], Bank of England, Bank of Japan, and others must fight the fire that's pretty big right now, and determine the water costs later," Wang added. "They have to maintain liquidity and create new tools and mechanisms that keep overnight credit available to banks, companies and institutions, Otherwise commerce is going to slow down like a car with an oil leak."

Economist Richard Felson agreed with Wang, adding that the Fed and or the U.S Treasury have to make sure corporations and other key institutions - - including state governments - - have adequate overnight and related short-term capital. "They have to prevent the financial crisis from choking off credit to sound companies and of course to the states. The crisis can not be allowed to prevent companies from conducting typical business or states from paying suppliers, making payroll, rolling over debt etc. or the economy will contract further," Felson said. "We've got to stop the momentum and get the ball rolling in the other direction."

With passage of the rescue bill, and the U.S. Treasury's upcoming actions to stabilize credit markets through a variety of tools/mechanisms, one area that is likely to experience negative consequences is the dollar.

Simply, more dollars borrowed (or more dollars printed) almost always means each dollar is worth less. Economist Richard Felson said a gradual, orderly decline in the dollar "would be expected, and is almost considered the default response, given increased U.S. government borrowing." The dollar closed Friday down about one-half cent to $1.3775 and $1.7713 versus the euro and the British pound, respectively.

Central banks monitoring dollar's level

However, leaders of the world's major industrialized economies will not, in Felson's interpretation, accept a sudden and/or inordinate decline in the dollar. "Along with increased stress on the financial system, 'brutal' currency movements, as [European Central Bank President Jean-Claude] Trichet has said, throws everything out of whack by making it hard for companies to project costs of foreign operations," Felson said. "For these reason and others I believe the major central banks will intervene to support the dollar, should the U.S. Treasury's extra borrowing or the U.S. Federal Reserve's extra lending for the bailout lead to too large or too quick of a decline in the dollar."

The U.S Federal Reserve and its companion, major central banks around the world again Monday took actions to keep financial markets liquid amid a credit crunch that has made private banks reluctant to lend critical, short-term funds to each other, and that threatens to slow global growth to a crawl.

The Fed said it increased the size of its dollar swap arrangements to $620 billion from the previously-announced $290 billion. The Fed also increased the size of its liquidity auctions and announced two forward auctions to provide funding over the year-end period.

"These steps are being undertaken to mitigate pressures evident in the term funding markets in the United States and abroad," the Fed said.

"By committing to provide a very large quantity of term funding, the Fed actions should reassure financial market participants that financing will be available against good collateral, lessening concerns about funding and rollover risk," the Fed said.

The nine banks participating in the swap lines are: the European Central Bank, Bank of England, Bank of Japan, Bank of Canada, National Bank of Denmark, Bank of Norway, Reserve Bank of Australia, Bank of Sweden, and the Swiss National Bank.

Economist backs Fed's moves

Economist Richard Felson applauded the Fed's move, given "the unchartered waters the Fed is in, and the political pressure it faces."

"It's liquidity front-and-center, while simultaneously determining with the [U.S.] Treasury which institutions have to be saved, which it can let the private sector dissolve, and at the same time begin the process of buying distressed debt," Felson said. "One goal is lowering the LIBOR spread, and this should help."

Libor-OIS rose 219 basis points Monday, Felson said, "a clear sign banks remain reluctant to lend to each other."

The dollar was lower early Thursday against most of the world's other major currencies, but traders underscored that the expected decline was orderly, not frenetic nor frenzied.

"We are seeing an orderly decline in the dollar, which was expected given the increased U.S. Government borrowing and spending associated with the AIG bailout and Fannie Mae and Freddie Mac rescues," Currency Trader Andrew Resnick said. "Banks are still hoarding cash and are reluctant to lend to one another but we're not seeing a large fall in the dollar, which is a moral victory of sorts."

At 10:20 a.m. EDT the dollar was mixed across the board - - down about one-half cent to $1.4383 versus euro and one-third cent to $1.8204 versus the British pound, but up about one-half yen to 105.24 versus Japan's yen.

Overnight lending rates drop

Resnick said he does not expect the U.S. Federal Reserve's effort, in conjunction with the European Central Bank, Bank of England, Bank of Japan, Swiss National Bank, and Bank of Canada, to auction $247 billion "to solve the financial crisis in a day or a week or month, but it is having its intended effect."

"It is easing money market pressures because overnight money market rates dropped about 120 basis points to 3.80%," Resnick said. "But more importantly it's sending a signal to the cash hoarders and those who may want to make a bet on the opposite of the central banks that 'You had better be careful trying to speculate against us because the likelihood of a series of cash interventions is high.' Over time, this will help maintain liquidity and keep the currency markets orderly."

The U.S. Federal Reserve and the major central banks around the world took action again Tuesday to keep the financial markets liquid, amid a credit crunch that threatens to slow global growth to a crawl.

The Fed added $50 billion in liquidity to the financial markets through overnight repurchase agreements. In addition, the European Central Bank, the Bank of England, and the Bank of Japan each announced previously unscheduled actions to add liquidity to the financial markets, Marketwatch.com reported Tuesday.

The Fed's action came after overnight rates soared 333 basis points to 6.44%, as private banks pulled back credit and became reluctant lend to one another.

Economist Peter Dawson told BloggingStocks Tuesday the aim of the world's major central banks is clear: maintain market liquidity to enable transactions between solvent parties.

"The Fed and other central banks may have drawn a line in the sand regarding not saving insolvent institutions, but their stance regarding functioning banks is clear: they're going to prevent solvent institutions from freezing up for lack of liquidity," Dawson said. "The private banks may not choose to use that liquidity, due to a reluctance to conduct business, but the funds will be there."

A flight to the dollar? Amid the United States' worst financial crisis in more than 20 years, perhaps since The Great Depression of the 1930s? It seems almost paradoxical, but that's the reality. So far. Stay tuned, an economist says.

The dollar has lost ground versus the world's other major currencies, amid this latest round of write-offs, bankruptcies and mortgage-asset-related stress on Wall Street, but the greenback has not plunged. In fact, the dollar is off its lows registered early Monday.

In early Tuesday trading, the dollar rose about a half-cent versus the euro to $1.4198, 1.5 cents versus the British pound to $1.7854, and a half-cent versus the Swiss franc to $1.1101. However, the dollar fell about 1 yen to 103.68 versus Japan's yen.

Themes: flight to quality, de-leveraging

Economist David H. Wang told BloggingStocks Tuesday the dollar's recent track displays two tendencies: a flight to quality and an unwinding of the carry trade -- i.e. a global de-leveraging.

"Although the U.S. Government and taxpayers are likely to spend more to deal with this financial crisis, and that implies more dollars in supply and inflation, institutional investors fear a decline or collapse in stock markets around the world, and are piling into the dollar," Wang said. "That is offsetting the dollar-weakening-effect of more U.S. Government spending. Essentially, it is flight to quality, so far."

The dollar Monday recovered from lows registered earlier in the session, but traders said uncertainty permeated the currency market, given the unprecedented developments in the global financial system.

"We're in unchartered waters, and no one is certain about the impact on the dollar or the financial system," currency trader Andrew Resnick told BloggingStocks earlier Monday. "The logical, rational view is that the dollar will fall based on the expectation of increased government spending and borrowing to deal with the widening financial crisis. But a major dollar fall may not occur if the markets judge the worst is over. That's why a lot of traders are flat now." Resnick added that he was flat, or had no open currency trading positions.

The dollar initially fell early Monday morning about 1.5-2% against the euro, British pound, yen and Swiss franc, but recovered somewhat after the European Central Bank and the Bank of England joined the U.S. Federal Reserve in taking action to calm the financial markets jolted by Lehman Brothers (NYSE: LEH) bankruptcy filing, Bloomberg News reported Monday.

ECB, BOE, Fed all add liquidity to system

The ECB awarded banks a one-day, money market auction of $30 billion that was three times oversubscribed, while the BOE loaned banks $9 billion for three days. Earlier, the Fed expanded the collateral it will accept for loans to securities firms.

These days, the U.S. Federal Reserve is not getting a great deal of help from its companion major central banks regarding monetary policy stimulus to pull the global economy out of is pronounced slowdown.

In the case of the Bank of England, it kept interest rates the same despite anemic GDP growth. In the case of the European Central Bank, it kept it's key rate at a seven-year high.

Economist: Two terrible decisions

Today, the BOE kept its benchmark interest rate at 5%, the ECB did the same at 4.25%, and London-based economist Mark Chandler is happy with neither.

"Just two terrible decisions stemming from flawed reasoning. Just dreadful," Chandler said. "The BOE and ECB are putting too much responsibility on the Fed to stimulate demand when we need all three central bank engines pulling at once to get out of this economic rut."