HONG KONG - THE US Federal Reserve's surprise rate cut smacked of panic in the face of a global stocks meltdown, and the move may yet fail to prevent a recession in the United States, analysts said on Wednesday.

The Fed chopped rates on Tuesday in a bid to shore up sentiment after global stock markets crumbled on fears of the looming slowdown. It was the central bank's first unscheduled cut since just after the Sept 11, 2001 attacks.

But while the 75 basis point cut appeared to calm markets in the short term - most Asian bourses were up on Wednesday after the move - its long-term effects are unclear and the move may have come too late, analysts said.

The Financial Times, Wall Street Journal and Economist all suggested that the decision by Fed chairman Ben Bernanke smacked of panic, as the unscheduled cut came little more than a week ahead of a Fed meeting.

'I wouldn't call it panic but I would say the Fed has moved into risk aversion mode,' said David Carbon, head of research at DBS Bank.

Some analysts, however, said Mr Bernanke had no time to waste after the plunge on the markets on Monday and Tuesday.

'If they had waited until the scheduled Fed meeting, the situation could have become much worse, so it was definitely a timely move,' said Zhang Ming, an economist from the Chinese Academy of Social Sciences.

National governments, the International Monetary Fund, economists and investors largely welcomed the decision to slash borrowing costs to 3.5 per cent from 4.25 per cent.

The move came just days after US President George W. Bush proposed around US$140 billion (S$202 billion) in tax cuts in a bid to stimulate the US economy - a move that had failed to calm investor sentiment.

Banks have lost billions of dollars as the value of assets linked to subprime mortgages evaporated, leading to a global credit crunch and a US housing market slowdown.

Now with fears of a recession looming, the markets are already starting to price in even more cuts later on, analysts said.

'We believe the rate cuts are open-ended, by which we mean there'll be more rate cuts in the future,' said Shen Minggao, a Citigroup economist in Beijing. 'It could go all the way down to 2.5 per cent, or another 100 basis points.'

'There's no criticism that the rate cut was too bold a step. If there is criticism, it's that authorities need to do more,' said Yoshimasa Maruyama, an economist at BNP Paribas in Tokyo.

But some commentators warned the Fed's move could create headaches for other parts of the world, such as Asia, where many economies are still growing strongly and trying to tame rising consumer prices.

'China and Asia are facing different problems, mostly inflationary pressure,' said Hong Kong-based Qu Hongbin, chief China economist for HSBC, adding China's central bank could now find it harder to raise borrowing costs.

Optimists say Asia could carry on growing and take up some of the slack even if the US economy stumbles, but some forecasters are more pessimistic.

Bernard Baumohl, managing director of The Economic Outlook Group, said after the cut that the Fed may not be able to stave off a downturn that spreads globally.

'What began as a contained subprime mortgage problem in the US has blown up into a full-fledged global credit crunch. And there is no sign yet of when it will end,' he said. -- AFP