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According to Liew, that's because the monetary-policy prescriptions offered by central banks have thus far done little to cure the constipated credit markets that are stalling the global economy. Under normal circumstances, interest-rate cuts by central banks would promote interbank lending. But Wednesday's coordinated rate cuts in the U.S., Europe and Asia have failed to restore lenders' confidence. The London Interbank Offered Rate, the benchmark for short-term interbank lending rates, actually rose to 4.75% Thursday, its highest level of the year. In Hong Kong, interbank lending rates have doubled in the past month. Banks remain...
...Market-watchers credited the relative market calm to Wednesday's coordinated rate cuts by the U.S. Federal Reserve and five European central banks. China, South Korea, Hong Kong and Taiwan also reduced benchmark lending rates. Ting Lu, an economist with Merrill Lynch in Hong Kong, called local market reaction to the cuts "generally positive, but cautious...
...China may cut rates two or three more times this year, Lu predicts, following a pattern established during the 1997 Asian financial crisis when the country used aggressive monetary policy to maintain economic growth. On Thursday Hong Kong, a Chinese territory, reduced its lending rate for the second time in two days, dropping it by 50 basis points to 2% amid what Monetary Authority chief Joseph Yam called "the financial crisis of this century...
...Japan, which is believed to already be in a recession, did not reduce its benchmark rate because it already stands at just .5%. But the Japanese government announced that $20 billion would be injected into the country's financial system to help free up frozen credit markets...
...rate cuts' effect on Asian stock markets may not last as policymakers continue their search for a solution to the global financial crisis. According to a report in the New York Times, the U.S. Treasury Department is considering taking part ownership of U.S. banks, effectively guaranteeing the solvency of the country's financial system. Britain announced a similar plan to shore up shaky banks by helping them refinance debt in exchange for ownership stakes. That move toward partial nationalization of the banking system underscores just how deep - and how apparently uncontrollable - the financial panic has become. With few tools left...