Taiwan's central bank on Sunday cut its key interest rate for the fourth time in less than eight weeks after the island posted its biggest decline in exports in nearly four years. The move in Taiwan came two days after South Korea reduced its main interest rate. Both cut rates by a quarter of a percentage point.
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The interest-rate reduction that the Bank of Korea announced on Friday was its third in four weeks, as Seoul tries to fight off an abrupt slowing of the country's economy.
Note the speed at which these central banks are cutting rates -- 4 time in 8 weeks and 3 in 4 weeks.
These are panic cuts, plain and simple. Something has changed in a big way.
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Sorry to say, but these are not "panic cuts." A panic cut would be a .75% or 1.25% cut all at once.
These are worse -- they are cuts that say "We don't know how bad things are. We don't know whether to panic or not, so we're going to waste our ammunition little by little in a way that won't do any good, rather than all at once that could have an effect."
These cuts are the moves of central bankers who have always been able to follow the Fed, but now they have to think for themselves. These are tentative moves of leaders who are in unfamiliar territory, don't know which way to move decisively, and can't do nothing.
So they whittle away at their rate and hope that some exogenous variable will change.
If we really thought that this market was bottoming, this should make us reconsider.
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