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Central banks to ease pressure on short-term funding markets

by Staff Reporter7 minute read
The Adviser

In a show of solidarity not seen since September 11, the Federal Reserve (Fed), European Central Bank (ECB) and three other central banks have collaborated to ease pressures on short-term funding markets.

The Fed has authorised temporary reciprocal currency arrangements (swap lines) with the ECB and Swiss National Bank of up to US$20 billion (A$22.6 billion) and US$4 billion (A$4.5 billion) respectively.

There are also plans for the Fed to hold two auctions this month worth $40 billion via the establishment of a temporary Term Auction Facility (TAF) program.  Two further auctions are planned for January although the amounts are yet to be determined.

The Fed will auction funds to depository institutions that are judged to be in generally sound financial condition by their local Reserve Bank.

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