Today’s surprise, coordinated rate cuts delivered by leading central banks will help sooth the credit crisis gripping world financial markets say Bay Street economists, but they don’t see today’s action as a cure all for market turmoil, and more cuts are expected.

The U.S. Federal Reserve, Bank of Canada, European Central Bank, Bank of England, Sweden’s Riksbank and Swiss National Bank all cut rates by 50 basis points today, lowering the Fed funds rate to 1.50%, the BoC overnight rate to 2.50%, the ECB refinance rate to 3.75%, and the BoE repo rate to 4.50%.

Also, China cut rates to 6.93%, and the Bank of Japan left rates unchanged at 0.5% but provided a communiqué to markets supporting the decision of the other monetary authorities.

TD Economics notes that the central banks issued statements that began with common wording, saying, “Inflation expectations are diminishing…the financial crisis has augmented the downside risks to growth and thus has diminished further upside risk to price stability.”

“The message from all of the central banks was loud and clear: the prospects of significantly slower global growth mean that global inflation risks are dead. The coordination and the rate change between regular meetings also infer the urgency of action and the need to restore confidence to the global financial system in the wake of unprecedented turmoil,” TD says.

The question is whether this action will work or not, and will the banks have to do yet more. “Is it up from here?” asks BMO Capital Markets. “From an economic perspective, no. The growth outlook for every major economy has weakened significantly well into 2009 and the longer credit markets remain frozen, the deeper the downturn will be. Bank bailout packages in the U.S., U.K., and Spain should help as well, but they will take time to work,” it says.

“Financial systems around the world need time to regain confidence, and it will likely be a slow healing process,” BMO adds.

“From an equity market perspective, the rate cuts and clear indications that policymakers stand ready to do more are supportive. However, with the economic backdrop still weak and downside earnings surprises likely to spread to non-financial companies, a sustained push higher would be difficult,” it says. “The story is similar for commodity prices, which might have further to fall as demand slows along with global growth.”

BMO predicts that more rate cuts will likely be forthcoming, “but whether that will be a soon as the next policy meetings is uncertain,” it says. “Additional rate cuts at that time cannot be ruled out, especially in the U.S., depending on incoming economic data and global money and capital market conditions,” it concludes.

TD also predicts that further rate cuts are in the pipeline, and it does see them coming at the next meetings. “We look for the Fed and the BoC to cut by a further 50 basis points at their upcoming rate announcements on Oct. 29 and Oct. 21, respectively. The ECB and the BoE likely have even greater easing to deliver in the months head, and we anticipate a cumulative 125 basis points from the former and 150 basis points from the latter.”

“The key to whether additional rate cuts are forthcoming will be the financial market reaction with some evidence of an easing in funding costs and stabilization of equity markets needed for the Bank to stay on the sidelines,” observes RBC Capital Markets.

It doesn’t necessarily foresee added cuts, but adds, “Another bout of co-ordinated rate cuts cannot be discounted, however, should global financial market sentiment fail to improve,” it says.

“Our base case view remains that the aggressive policy actions taken by global central banks and governments will get traction, easing some of the stress in financial markets and that Canada’s domestic economy, while slowing, will keep the overall economy from falling into recession.” It expects the Bank of Canada to hold the policy rate at 2.5% but acknowledge the risk of additional easing is significant if credit markets do not respond positively to these actions.

“While the rate cuts are welcome, the global economy is still likely to slow further over the coming quarters,” BMO concludes. “We expect central banks to continue to ease credit conditions through rate cuts and direct liquidity provision. Additional actions on the fiscal front in the U.S. are needed as well to reverse the credit squeeze on state and local governments and to directly help households, particularly homeowners whose mortgage payments are in arrears, as well as those with significant negative equity. Government will also need to take actions to appropriately redevelop vacant properties in some hard-hit areas.”