Central Banks Move to Ease Credit Crunch

According to reports in Toronto's Globe and Mail today, the Bank of Canada joined forces with U.S. and European central banks Tuesday, injecting markets with billions of additional liquidity relief in a continued and co-ordinated bid to ease a global credit shortage.

Just before equity markets opened in North America, Canada's central bank said it will inject $4-billion worth of liquidity into the markets in two parts through its Special Purchase and Resale Agreements. The first injection, worth $2-billion, will be made on March 20 with the securities set to be sold back on April 17, while the second is scheduled for April 3, to be paid back on May 1st.

The central bank said the 28-day purchases, which mirror moves it made in December, are “part of its continuing provision of liquidity in support of the efficient functioning of financial markets.”

Canada's central bank co-ordinated Tuesday's action with the U.S. Federal Reserve, the European Central Bank, the Bank of England and the Swiss central bank. The synchronized global bank action is an effort to provide help in a global credit crises that threatens to push the U.S. economy into its first recession since 2001 if it hasn't already.

The Federal Reserve said Tuesday it will make up to $200-billion (U.S.) in cash available to cash-strapped financial institutions, also for 28 days as opposed to overnight.
“Pressures in some of these markets have recently increased again,” the Fed said in a statement. “We all continue to work together and will take appropriate steps to address those liquidity pressures.”