ECB pumps $100 bn back into money markets

ECB pumps $100 bn back into money markets

Frankfurt: The European Central Bank said on Thursday it would pump $100 billion back into interbank money markets in one-day loans, raising the daily amount by $30.

The operation has become a daily event aimed at keeping cash flowing through the key financial pipeline, but the increased sum, which followed a raise of $20 billion on Wednesday, suggested tension remained at very high levels in the eurozone markets.

Results of the ECB’s offer, including demand and the rate at which the dollars are lent, were to be released later in the day.

By raising the amount of dollars it lends to eurozone banks, the ECB appeared to be taking another step in a global effort to calm heightened tension on the crucial financial markets.

On Wednesday, the ECB and other central banks on two continents announced exceptional coordinated interest rate cuts to help fight a tenacious international financial crisis.

The money markets determine the availability of credit for vast numbers of people around the globe, from managers trying to fund their businesses to families and students seeking personal loans.

Commercial banks generally lend and borrow cash from each other on interbank markets but these have dried up since the US market for high-risk, or subprime, mortgages collapsed more than a year ago.

The ECB and other major central banks have been pumping huge amounts of cash in the form of loans to ease turmoil stemming from the latest crisis in the US financial sector, after the investment bank Lehman Brothers went bankrupt last month.