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Asian banks copy rate cut

Catherine Deshayes

Following on from the interest rate cuts introduced this week by the Bank of England, the Federal Reserve and the Reserve Bank of Australia, two Asian central banks have also cut their rates in a bid to stave off the growing economic crisis...

Asia's rate reductions were made following a similar move on Wednesday by the U.S. Federal Reserve, the Bank of Canada, the European Central Bank and China's central bank.

The cuts, from South Korea, Taiwan and Hong Kong, have helped to prevent regional stock markets sinking even further.

It was hoped that the cuts will bring some measure of confidence back into the market, and help to alleviate the financial market drops, but despite the move, confidence remained low in Asian markets as fears over the prospect of a global recession continued.

However, shares in Seoul and Taipei improved after the central banks each reduced their benchmark interest rates by 25 basic points.  

The Bank of Korea cut its key seven-day repurchase rate to five per cent and the Korea Composite Stock Price Index reversed early losses.

Taiwan's Central Bank cut its key interest rate for the second time in two weeks and the country's main TAIEX share index was up more than one per cent as a result.

The Bank of Japan did not take part in the cut as its interest rates are already near zero.

However, Japanese Finance Minister Shoichi Nakagawa welcomed the move. "In this financial crisis, I highly appreciate that the central banks took appropriate steps," he told reporters.

Despite all of the cuts, the financial world remains locked in a tailspin with prospects for improvements looking ever bleaker.

In a reference to Chancellor Alistair Darling's £500 billion plan to part-nationalise eight of the UK's main banks, experts on Wall Street said that state intervention would be needed to get banks lending again, and that this was their preferred course of action.

Despite the ailing market and increasing global concern, Chief Economist of the International Monetary Fund Olivier Blanchard says the economic crisis is not as bad as the Great Depression of the 1930s.

Picture by jimpetr