| Business | October 17, 2008 10:56 AM EST |
| Central banks in Asia slash interest rates |
| By Luisana Suegart from Markets.com |
Central banks in South Korea, Taiwan and Hong Kong were the latest to cut benchmark rates to restore investor confidence amidst the global financial crisis.
The rate cuts came a day after the U.S. Federal Reserve and the European Central Bank made oordinated cuts of 0.5 percent. Four other central banks followed in the move, as did the People’s Bank of China, which cuts its one-year lending and deposit rates by 0.27 percent.
The Bank of Korea and Taiwan’s central bank cut their benchmark rates by 0.25 percent; it was the first time Korea cut its rate since Nov. 2004, and Taiwan’s second cut in two weeks. Hong Kong lowered its rate by half a percentage points, down to 2 percent. On Wednesday, the Hong Kong Monetary Authority cut its key base rate by a whole percentage point.
The Bank of Korea also lowered the seven-day purchase rate to 5 percent, while the central bank in Taiwan brought the discount rate on 10-day loans to 3.25 percent.
Upon hearing word of the rate cuts, the Asian markets saw profits after days of record-breaking declines. The MSCI Asia Pacific Index rose 0.7 percent after falling 16 percent in five days. The Kospi index in South Korea rose 0.6 percent, Japan’s Topix index rose 0.7 percent, and Hong Kong’s Hang Send index rose 2.7 percent.
In the meantime, central banks consider injecting cash into its financial systems, starting with the Bank of Japan, which already directed $20 billion to its banks.
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