China cuts rates, US and others to follow to bolster economies

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LONDON, Oct 29 (Reuters): China cut its interest rate for the third time in six weeks Wednesday, a measure the United States, Japan and European Central Bank (ECB) are expected to follow by the end of next week to bolster economies facing recession.
While dispensing with a repeat of the coordinated cuts made earlier this month, authorities fear the worst financial crisis in 80 years will usher in a long recession and are looking to individual rate reductions to soften the blow.
China, which has said it would not fall victim to the crisis, cut its interest rate to 6.66 per cent from 6.93. The People's Bank of China (PBoC) said it would take effect Thursday.
"There's building evidence in China that the slowdown we're seeing everywhere else is taking place there as well," said Derek Halpenny, European head of FX research at BTM-UFG.
China has approved a series of policy measures to try to shield it from the crisis, including a cut in costs for home buyers, a rise in export tax rebates and a fund for small and medium-sized businesses.
A sharp economic slowdown across the world means even once-booming economies are forced to change policy tack.
The Federal Reserve is widely expected to cut US rates by at least half a point to 1 percent, the lowest level since June 2004.
Norway's central bank was also seen reducing rates by 50 basis points to 4.75 per cent Wednesday.
"The picture is now so depressing that Norges Bank has to do whatever it can to decrease rates ... as quickly as possible," said Inge Furre, economist at Sparebanken Moere.
The Bank of Japan (BoJ) will consider cutting rates at a policy meeting on Friday but will watch market conditions before deciding, a source with knowledge of the matter told Reuters.
Bets on a quarter-point cut to 0.25 per cent reversed a recent surge in the yen, which has hurt exporters and helped force Japanese shares lower.
A cut by the world's second biggest economy would "send a message to the world that Japan is cooperating with other nations in tackling the financial crisis," said Koichi Haji, chief economist at NLI Research Institute in Tokyo.
The ECB and the Bank of England (BoE) are expected to ease policy at their regular meetings next week.
Falling oil and food prices probably helped to cool German inflation for the third month in a row in October, giving the ECB added scope to cut the rate.
A poll said the bank would cut a half point off rates to 3.25 per cent, their lowest in two years.
An executive board member of the ECB said growth in the euro zone would be lower than expected.
"Confidence will not return until we stop to think about the measures which have been taken and we can see financial institutions resuming their normal activity," Jose Manuel Gonzalez Paramo said in a newspaper interview.
The expected rate cuts buoyed Asian and European stocks. Japan's Nikkei ended up 7.7 per cent and European shares climbed 5.4 per cent, helped higher by China's rate cut.
US shares were expected to climb modestly, following the second-biggest ever rise a day earlier.
But analysts said any market recovery would be short-lived with a sharp economic downturn in progress.
"Enjoy the party while you can," said David Buik, market commentator at Cantor Index in London.
Governments have pledged about $4 trillion to support banks and restart money markets to try to stem the crisis set off by the bursting of a US housing market bubble.
But as credit lines have dried up, a growing number of governments have had to look for help from global lenders.
The IMF, European Union and World Bank agreed to a $25.1 billion economic rescue package for Hungary.