The United States Federal Reserve, in conjunction with some of the world’s largest central banks, injected US$180 billion into the markets on Thursday in an attempt to improve liquidity and try and keep the credit crisis from claiming more victims.
The Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, the Bank of Japan and the Swiss National Bank announced coordinated measures designed to address the continued elevated pressures in U.S. dollar short-term funding markets.
“These measures, together with other actions taken in the last few days by individual central banks, are designed to improve the liquidity conditions in global financial markets,” says a joint statement.
The Bank of Canada and the Federal Reserve have agreed on a US$10 billion swap facility to be accessed, should the need arise, to provide U.S.-dollar liquidity in Canada.
The Federal Open Market Committee has authorized a $180 billion expansion of its temporary reciprocal currency arrangements and authorized increases in the existing swap lines with the ECB and the Swiss National Bank.
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These larger facilities will now support the provision of U.S. dollar liquidity in amounts of up to $110 billion by the ECB, an increase of $55 billion, and up to $27 billion by the Swiss National Bank, an increase of $15 billion.
In addition, new swap facilities have been authorized with the Bank of Japan and the Bank of England. These facilities will support the provision of U.S. dollar liquidity in amounts of up to $60 billion by the Bank of Japan and $40 billion by the Bank of England.
European markets responded positively to the move by the central banks, with the FTSE 100, DAX and CAC 40 each gaining about 1% in late-afternoon trading.
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