The European Central Bank (ECB) announced on Tuesday a new liquidity injection into the eurozone banking system amounting to 7.7 billion euros, but also assessed that market conditions are approaching normal levels.
The ECB decided on this move for the fourth consecutive working day since last Thursday when it significantly surprised equity markets with its injection of 95 billion euros. It was joined by the central banks of the United States and Japan, as well as other smaller central banks, in an effort to calm the rise in interest rates in money markets.
There was, in fact, a danger that short-term financing rates would greatly exceed reference levels as a result of the credit market crisis. This was partly triggered by some major commercial banks’ reluctance to lend in the money markets due to nervousness related to the crisis with U.S. subprime mortgage loans. (Hina)
