Germany Cuts Discount Rate Half a Point : Lending: Move raises hopes of global reductions, but some analysts call it too cautious to have much effect.

Germany’s central bank cut its discount rate slightly Thursday, raising hopes of a round of global interest rate reductions that spurred a rise in blue chip stocks on Wall Street.

On the New York Stock Exchange, the Dow Jones industrial average rose 38.90 points to end at 3,465.64, within short distance of the March 10 record high close of 3,478.34.

But the dollar fell, as traders had long anticipated the cut and were disappointed that the Frankfurt-based Bundesbank did not also trim its key Lombard rate.

The Bundesbank’s decision to cut its discount rate to 7.5% from 8% is expected to encourage Germany’s partners to trim their interest rates to boost their own economies, which should boost U.S. exports.

Central banks of Switzerland, Denmark and the Netherlands also lowered their interest rates.

But the Bundesbank left the Lombard interest rate at 9% and other key rates untouched in a move that analysts described as too cautious to have significant impact on the global economy.

The central bank has come under heavy pressure from the United States and European neighbors to reduce high German interest rates, blamed for uncertainty in the European monetary system.

In a brief statement, the bank described the rate cut, effective today, as a “continuation of Bundesbank policy of step-by-step interest reduction.”

German Finance Minister Theo Waigel called the rate trim a “positive stimulus for German economic growth in a difficult economic situation.”

The minimal rate cut, economists said, is a clear attempt to protect the mark from heavy pressure on foreign exchange markets and hold German inflation in check.

Inflation is running at 4.2% in Germany, which is in the grip of a serious recession after its unification more than two years ago. The cost of rebuilding the formerly communist eastern part of the country is estimated at up to $610 billion. Unemployment is running at 7% in western Germany and 14% in the east, and key industries such as engineering, chemical manufacturing and auto making are in a slump.

“The Bundesbank has been confusing the hell out of the market,” said Jim O’Neill, a currency analyst with Swiss Bank Corp. in London. “It was widely expected that they would do something. But it’s probably best to regard this as a halfway-house measure.”

Another London-based international economist, Jouni Kokko of SG Warburg Securities, said market reaction to Thursday’s reduction was one of disappointment.

“They don’t want to endanger and undermine the D-mark,” Kokko said, describing the half-percentage drop as “a very cautious move. It’s certainly insufficient to turn the economy around, and it’s quite clear that the German economy is going to suffer for quite some time.”

The Bundesbank reduced its discount rate and its Lombard rate in early February in a move aimed at boosting global economic growth and relieving pressure on Europe’s tumultuous currency markets.

The Lombard rate is the emergency lending rate offered to commercial banks unable to find money elsewhere.

The Lombard was cut from 9.5% to 9% on Feb. 5, when the discount rate was lowered from 8.25% to 8%.

The discount rate is the cheapest form of bank refinancing.

DOW LEAPS 39: Complete market coverage. D4