ECB, BOE Ready to Ease Market Volatility
Posted on: Wednesday, 5 September 2007, 15:09 CDT
The European Central Bank said Wednesday money-market volatility had increased and it was ready to contribute to orderly conditions.
Its statement followed the Bank of England's offer of extra cash to banks to relieve some pressure on interest rates.
Volatility in the euro money market has increased and the ECB is closely monitoring the situation, the European bank said. Should this persist tomorrow, the ECB stands ready to contribute to orderly conditions in the euro money market.
Within minutes of the announcement, eurozone overnight interbank lending rates dropped to 3.99 percent to 4.15 percent, from 4.64 percent to 4.76 percent. The central bank's target is 4 percent.
Britain's central bank observed overnight sterling rates of 6.11 percent were unusually high and said it would offer as much as $8.9 billion Sept. 13 at the benchmark 5.75 percent interest rate, instead of its usual penalty rate 1 point higher.
The bank said the moves would relieve some pressure on interest rates for overnight borrowing.
But it said it did not expect to intervene to reduce three-month borrowing costs among banks, which have jumped to 6.8 percent, their highest rate since December 1998.
Both central banks were scheduled to announce monthly interest-rate decisions Thursday.
Source: United Press International
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