Thu, Dec 01, 2011 - Page 12 News List

Central banks discuss deal for cheaper US dollar access

AP and BLOOMBERG, FRANKFURT, GERMANY

Central banks around the world say they are taking coordinated action to ease strains on the financial system.

The European Central Bank (ECB), the US Federal Reserve, the Bank of England and the central banks of Canada, Japan and Switzerland are all taking part.

The ECB said in a statement the banks are making it cheaper for banks to get US dollar liquidity when they need it, starting on Monday. They are also taking steps to ensure banks can get ready money in any currency if market conditions warrant.

The central banks agreed to reduce the interest rate on US dollar liquidity swap lines by 50 basis points and extend their authorization through Feb. 1, 2013.

The new interest rate has been reduced to the US dollar overnight index swap rate plus 50 basis points, or half a percentage point, from 100 basis points, the Fed said in a statement in Washington.

“The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity,” the statement said.

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