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People's Daily Online>>China Business

Coordination among central banks has limits

(People's Daily)

08:11, December 07, 2011

Edited and translated by People's Daily Online

The U.S. Federal Reserve Board announced on Nov. 30 that the Federal Reserve had decided to lower the interest rate on U.S. dollar liquidity swap arrangements by 50 basis points in a coordinated action with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank and the Swiss National Bank to ease the tight market liquidity and support the global financial system.

This joint action indicates further slashed cost of U.S. dollar loans, increased liquidity supply and boosted market confidence in the future.

The temporary currency swap arrangement between the Federal Reserve and other major Western central banks was launched in May 2010. The interest rate cut of 50 basis points, and lowering the cost of U.S. dollar loans can not only ease strains in the global U.S. dollar financial market but also relieve the anxiety of commercial banks to a certain extent.

In addition, this action will mitigate the pressure of assets sales on banks and ease the increasingly tense supply of credit in the euro zone. With further escalation of the euro zone debt crisis, it becomes increasingly difficult for euro zone banks to obtain financing.

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