Bank of England to pump 10 billion pounds into money markets

LONDON - The Bank of England announced Wednesday that it would inject 10 billion pounds (20 billion dollars, 14.3 billion euros) into longer-term money markets next week amid the ongoing global credit squeeze.

By (AFP)

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Published: Wed 19 Sep 2007, 8:31 PM

Last updated: Sat 4 Apr 2015, 11:42 PM

Until now, the British central bank has refrained from pumping cash into the three-month money markets—unlike the US Federal Reserve and the European Central Bank.

The Bank of England (BoE) said Wednesday it wanted to address long-term liquidity issues in the so-called interbank market—where commercial banks lend to each other.

The funds will be injected next week via a bidding process and will become payable after three months.

The BoE added that another three auctions would also be held over the three subsequent weeks, but did not specify the amount of additional funds.

‘This measure is being taken in order to alleviate the strains in longer-maturity money markets,’ the central bank said in a statement announcing the news.

Commercial banks, like the troubled Northern Rock, are nervous about lending to each other because of fears about bad investments linked to US home loans. That sentiment has led to a shortage of cash for lending purposes.

Over the past fortnight, the BoE has supplied money markets with two separate injections of 4.4 billion pounds which were repayable on a weekly basis.

However, these funds were aimed at bringing down shorter-term overnight lending rates between commercial banks.

Institutional lenders tightened credit conditions last month following the collapse of the US market for high-risk mortgages, also known as the subprime market.

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