Rate cuts alone won't fix financial problems

FRANKFURT (Reuters) - Interest rate cuts alone won't be enough to fix the problems at the core of the global financial system due to a lack of confidence in the health of financial institutions.

Central banks around the world joined forces to cut interest rates on Wednesday, a move aimed at easing financial market strains. Now the question is whether the dramatic move will do the trick.

"At first blush, while this is an big step, it is unlikely to prove sufficient to stem the rot," said Marc Chandler at BBH.

BENEFITS

-- The united front should give investors confidence that authorities are on the ball and are prepared to take extraordinary action as required to shore up the global financial system.

"Concerted central bank rate cuts, considered unthinkable just days ago, show that G7 authorities will do whatever it takes to address the consequences the crisis," Lena Komileva at Tullett Prebon said.

-- The move recognises the impact of market turbulence on economic growth and the added stimulus should help to shield economies from market fallout.

-- China's participation in the concerted efforts shows that emerging market powers are working with policymakers from industrialised nations to find a truly global solution.

-- The action should free up consumer and business spending by reducing the cost of credit.