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Fed and ECB inject £44bn to unglue money markets
By Sean Farrell, Financial Editor
Published: 07 September 2007
Central banks in the US and Europe pumped money into the financial system yesterday to try to unglue the money markets as the price of inter-bank lending continued to rise, causing fears about the wider economy.
The US Federal Reserve injected $31.3bn (£15.5bn) into the banking system and the European Central Bank pumped €42.2bn (£28.5bn) into the money markets.
Central banks are trying to encourage banks to start lending to each other again after rocketing defaults by risky US mortgage customers caused the value of bonds backed by the loans to tumble. The market for all but the safest forms of debt has virtually dried up because financial institutions are worried about where losses from exotic securities and derivatives will turn up next.