Six central banks around the world - including the US Federal Reserve, The European Central Bank, and the Bank of England - cut interest rates by half a percentage point today in a bid to halt sliding stock markets. China's Central Bank followed suit, cutting its rate by 27 basis points. The other central banks to act were Sweden's, Switzerland's and Canada's. Shares rallied on the news, although the move came too late to save Gulf markets, which were closed prior to the cuts, with the Dubai Financial Market down 8.43 per cent and the Abu Dhabi Securities Exchange down 6.43 per cent. The Saudi Tadawul lost 6.12 per cent today, while Kuwait was down 1.41 per cent, Doha down 8.75 per cent, Muscat down 7.21 per cent and Nahrain falling 2.70 per cent.
The move has had a positive effect on other stock markets, however, with the British, French and German markets all recovering after their large earlier losses. The Central Bank of the UAE will cut interest rates in line with the Fed's decision because the dirham is pegged to the dollar, leaving the rate in both countries at 1.5 per cent. Despite the move, one economist in the country said the move will have little effect, calling it an "aspirin and not a panacea" when much more radical action is needed.