UK welcomes world cash injection
A joint plan by five central banks, aimed at easing the credit crunch in financial markets, has been welcomed by UK Prime Minister Gordon Brown.
Up to $110bn (£54bn) in loans will be made available to world money markets by central banks including the Bank of England and the US Federal Reserve.
In an interview with the Times newspaper, Mr Brown said there should be more focus on such co-operation. The unprecedented move is a sign of the severity of the problems, analysts say.
The Federal Reserve and the Bank of England will team up with the European Central Bank and central banks from Canada and Switzerland to offer the cash loans, to be made available in auctions.
Such a co-operative act is a first, BBC business editor Robert Peston said.
Other analysts pointed out that the actions are on a greater scale than the moves taken by the Fed to shore up the economy after the 9/11 attacks on the US.
Mr Brown, due in Lisbon for the signing of the new European reform treaty, told the Times the moves were "the co-operative effort I've wanted to see for some time.
"It signals an international desire to act in what has been a period of global financial turbulence."
'Staving off recession'
Share prices in the US rose sharply after the plan was announced on Wednesday, but have since dropped again. Five of the most powerful central banks are taking concerted action to stop a banking crisis turning into a recession, the BBC's Mark Gregory said.
The problem is that commercial banks in rich nations have sustained huge losses on investments that have gone sour, he said. This has made them reluctant to lend any more money, especially to each other.
By acting together to pump extra funds into the system in the form of loans, the central banks hope to have a bigger impact. But they are also putting their credibility on the line, our correspondent added. If the plan fails, it is unclear what else they could do to restore confidence.
Peter Dunay, chief strategist at investment bank Leeb Capital Management in New York, said the new money could only help, but there was a broader problem to consider.
"Ideally, what we are looking for is the financial institutions to have written off their problems, built up confidence and be willing to lend to each other," he told the BBC's World Today programme.
"Right now... they do not want to lend - they do not want to lend to the public, they do not want to lend to each other. "They don't have the capital, they're very concerned and they're holding a lot of debt that is still a problem for them."
Source: BBC News
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