The Federal Reserve yesterday injected another US$38 billion into the US
financial system and vowed to pump as much money as needed to help beat back a
widening credit crisis.
The Federal Reserve Bank of New York added 19 billion dollars in temporary
reserves Friday morning, and then injected in another16 billion dollars in
reserves hours later. And in the afternoon, it pumped 3 billion dollars more.
The Fed, which also pumped 24 billion dollars into the market Thursday, said
in a statement it stood ready to release more money if necessary.
"The Federal Reserve is providing liquidity to facilitate the orderly
functioning of financial markets," said the U.S. central bank.
"The Federal Reserve will provide reserves as necessary through open market
operations to promote trading in the federal funds market at rates close to the
Federal Open Market Committee's target rate of 5-1/4 percent," said the Fed
statement.
"In current circumstances, depository institutions may experience unusual
funding needs because of dislocations in money and credit markets," the
statement said.
The Fed said that, as always, its discount window was available as a source
of funding.
Meanwhile on Friday, the European Central Bank (ECB) also injected 61.05
billion euros (around 83 billion U.S. dollars) into the money market after
pumping 98.4 billion euros (around US$129.65 billion) into the market on
Thursday.
The two central banks' action comes one day after a financial panic about a
credit crunch swept through Europe.
Investors believed that the central banks foresaw serious problems in the
banking sector arising from the U.S. subprime mortgage crisis.
Over the past two days, central banks in Europe, Asia and North America have
pumped out more than 300 billion in an effort to ward off the widening credit
crisis.