Not the time for rate cuts

All eyes are on Europe right now. Even in Asia, which so far is blissfully removed from the financial jitters in the West, apprehension is growing. That's understandable: the region can withstand a mild, cyclical downswing in Europe and the United States, but, as 2008 showed, not outright financial calamity.

That's not on the cards just yet, but the memories of the global financial crisis clearly run deep. Pressure is thus rising on local central banks to cut rates and pre-empt a potentially sharper downturn in Asian growth. That would be a mistake.

No doubt, aggressive rate cuts in 2008, in China as elsewhere, helped spur an impressive rebound. Asia's industrial output, partly as a result, is more than one-third higher now than it was at the beginning of that slump. So it is tempting to think that central bankers will be quick to repeat that feat, slashing rates once again as growth falters. Financial markets, let's face it, are enamored with such policy insurance whereby officials instantly cure any economic ills. Consequently, investors are already pricing in hefty cuts.