Nov. 8 (Bloomberg) -- Finance officials from the Group of 20 nations meeting in Sao Paulo today are discussing the possibility of further cuts in interest rates in a bid to limit the damage from the global credit crisis, Canadian Finance Minister Jim Flaherty said.

``The U.K. made a fairly dramatic rate drop this week and there's more discussion here about that subject,'' Flaherty said in an interview. ``There's less room for the U.S. as you know than Canada.''

Canada's central bank joined the Fed, the European Central Bank and the Bank of England in an unprecedented coordinated interest rate cut on Oct. 8 after the collapse of Lehman Brothers Holdings Inc. sent credit markets into seizure. All four banks have followed up with further reductions since then, with the U.K. announcing Nov. 6 the biggest rate cut since 1992.

Flaherty said coordinated fiscal stimulus, as is being proposed by U.K. Prime Minister Gordon Brown and the International Monetary Fund, may not win support because some countries can't afford to increase spending.

Central banks in emerging economies may also join a renewed rate-cutting effort as policy makers battle to contain the fall- out from a crisis that's set to drag the world's leading industrial economies into a recession together for the first since the Second World War.

China, India, Mexico

Mexican Deputy Finance Minister Alejandro Werner today said his country's central bank, which hasn't lowered borrowing costs since the credit crisis began 15 months ago, has scope to cut rates after food and commodities prices fell.

``Interest rates like the one we have now are no longer necessary,'' Werner said in an interview.

China cut its key interest rate for the third time in two months on Oct. 29 while the Reserve Bank of India on Nov. 1 lowered its main interest rate for the second time in two weeks.

Flaherty said ``there are ongoing conversations about who plans to do what when'' on interest rates. ``I expect that these discussions will lead to some degree of coordinated action,'' he told reporters today ahead of the G-20 talks.

Governments in emerging countries are also stepping up their independent responses as the financial crisis spreads to their economies.

Brazil, Russia, India and China, the so-called BRIC nations, plan coordinated measures to increase trade and capital flows between their economies, Russian Finance Minister Alexei Kudrin said in an interview today. India, Russia and Brazil have already injected funds into commercial banks and South Korea last week unveiled a ($10.8 billion) fiscal stimulus plan.

`House of Cards'

``This is a global crisis and demands global solutions,'' Brazilian President Luiz Inacio Lula da Silva said. ``The G-7 alone is not in conditions to conduct the world economy. The participation of the developing world is essential.''

Lula told delegates that the world's financial system ``collapsed like a house of cards'' and called on rich nations to increase regulation.

The U.S. and the EU are tussling over proposals to tighten up financial regulation. European leaders want to give the IMF responsibility for financial stability around the world. The U.S. opposes any international regulator with cross-border authority, according to a senior U.S. official.

``We are pleased that European leaders, in a statement released yesterday, recognized the importance of coordinating responses to the financial crisis,'' President Bush's spokesman Dana Perino said in an e-mailed note. ``The summit will be an important opportunity to highlight this common ground and our shared commitment to enhanced international cooperation and coordination, as well as to reaffirm a commitment to free market principles.''

To contact the reporter on this story: Greg Quinn in Sao Paulo at gquinn1@bloomberg.netBen Sills in Madrid at bsills@bloomberg.net

Last Updated: November 8, 2008 14:21 EST