Fed Dollar-Funding Cost Cut Shows Limits of Action on Europe

The Federal Reserve-led global effort to ease borrowing costs for financial firms shows both the central bank’s power to jolt markets -- and the limits of its ability to alleviate the European debt crisis.

Stocks rallied worldwide, commodities rose and yields on most European debt fell after the Fed and five other central banks yesterday cut the cost of emergency dollar loans to banks outside the U.S. At the same time, the action falls short of more-drastic moves that central banks are reluctant to take, including purchases or guarantees of countries’ bonds.