The Governor of the Central Bank, John Hurley, has said we are going through the most difficult period of financial turbulence in living memory.
He was speaking to RTE after world central banks earlier cut interest rates by 0.5 percentage points in a co-ordinated effort to ease financial market turbulence. Mr Hurley said today's interest rate cut was not a 'cure-all'.
Banks react to interest rate cut
The European Central Bank, the US Federal Reserve, the Bank of England and the Swiss, Canadian and Swedish central banks all made a half a percentage cut to their key rates.
The Fed cut its key federal funds lending rate by half a percentage point to 1.5%. The ECB also cut by a half-point to 3.75% as did the Bank of England, taking its rate to 4.5%.
The Swiss National Bank's cut brought its interest rate down to 2.5% from 3%. The Riksbank's move in Sweden brought the rate there to 4.25%, while in Canada, the key lending rate now stands at 2.5%.
Mr Hurley said the move was aimed at addressing the global lack of confidence in financial markets and institutions.
He said that, at a time of weakness in the Irish economy, the move should help to cut business costs and ease the repayment burden on mortgage holders. He said it would also encourage investment and reduce strains on financial markets.
In a joint statement, the central banks said that inflationary pressures have started to moderate in a number of countries. 'The recent intensification of the financial crisis had augmented the downside risks to growth and thus has diminished further the upside risks to price stability,' they added. 'Some easing of global monetary conditions is therefore warranted,' they said.
The US Fed said it made the move 'in light of evidence pointing to a weakening of economic activity and a reduction in inflationary pressures.'
Today's statement also said that the Bank of Japan expressed its strong support on the co-ordinated rate cuts, though it did not join in as its rates are already at 0.5%. China also joined today's effort, cutting its key rate 27 basis points.
Hong Kong earlier slashed the borrowing rate it charges banks by a full percentage point, a day after Australia's central bank delivered its biggest interest rate cut in 16 years, also a full point.
Central banks have in pumped massive amounts of cash into interbank money markets to ensure that the critical networks did not collapse but their efforts have met with little success as the credit crunch bites deeper.
