Central banks pump emergency cash to ease credit crunch
Frankfurt/Washington, December, 12, 2007- The world's leading central banks said Wednesday they were launching further co-ordinated moves to inject cash into the banking system to help fight the credit squeeze sparked by the meltdown in US subprime home mortgages.
The announcement by the banks including the US Federal Reserve, the European Central Bank, the Bank of England, the Bank of Canada and the Swiss National Bank helped to underpin global stock markets with shares in Europe at one stage climbing by one per cent.
By mid afternoon trading, the Eurostoxx 50 index of leading stocks had jumped by 0.8 per cent with the Wall Street's Dow Jones index opening up about 1.6 per cent.
The increase helped to reverse a slide in European stocks earlier in the day, which came in the wake of investor disappointment that the US monetary authorities had decided to deliver only a modest rate cut of 25 basis points.
The central banks' move Wednesday included 24 billion dollars in currency swap lines to the European and Swiss central banks.
On Tuesday, the US Fed cut key US interest rates by a quarter percentage point, sending Wall Street into a tailspin because investors were looking for a bigger cut. US stocks rallied Wednesday after the Fed announcement.
The Fed said Wednesday it was creating a temporary way to channel additional short-term cash loans to US commercial banks "that are judged to be in generally sound financial condition." The new programme will run at least until January 28.
By widening the Fed's options of injecting cash into financial markets, "this facility could help promote the efficient dissemination of liquidity" for squeezed commercial banks, a Fed statement said.
To extend the pool of aid internationally, Fed policymakers also approved the option of swapping cash with the ECB and the Swiss National Bank - up to 20 billion dollars with the ECB and up to 4 billion dollars with the Swiss, for up to six months. dpa