The United States signalled it could consider buying into debt-laden banks to help get funds flowing through the financial system again after the IMF warned the world was on the brink of recession.
South Korea, Hong Kong and Taiwan followed on Thursday the US Federal Reserve and central banks from Europe, Canada and China in cutting interest rates to contain the market meltdown that has destroyed lenders from Wall Street to Iceland.
However, the rate cuts underlined the grim economic outlook.
Markets were mixed. Japan’s Nikkei dipped to its lowest close in more than five years after a volatile day. European stocks opened higher after falling to near five-year lows on Wednesday despite the dramatic coordinated rate cuts.
“Just lowering interest rates would be far from sufficient in the current situation,” said Amar Gill, head of thematic research at CLSA in Singapore.
“The main problem now is that banks are not lending to weaker banks, and the overall banking system is not lending to corporates.”
Following the move by central banks, there is heightened pressure on G7 finance ministers meeting in Washington on Friday to come up with their own coordinated approach to the crisis.
{{/usCountry}}Following the move by central banks, there is heightened pressure on G7 finance ministers meeting in Washington on Friday to come up with their own coordinated approach to the crisis.
{{/usCountry}}In its latest sign of global financial contagion, Iceland took control of the country’s biggest bank Kaupthing, the third such takeover in a week.