UK's central bank, the Bank of England will pump an additional 55 billion pounds in a fresh effort to address worsening credit market pressure as hopes for a US bail-out faded, media report say.
The operation was consistent with its objective, which was forcing down the three-month benchmark Libor interbank lending from yesterday's 6.2762 per cent closer to 5 per cent base rate, The Times report quoted the bank as saying.
Three month dollar Libor rose by nearly 30 basis points to 3.76 per cent.
Further, the bank stated that it intends to offset the additional reserves taken up in the long-term repo operations in its other operations, if necessary by draining reserves.
These operations are intended to address funding pressures over quarter end, the report quoted the Bank as saying, adding that it formed part of a coordinated series of actions with other central banks including the US Federal Reserve, the European Central Bank and the Swiss National Bank.
The Bank of England would increase the term of its existing operations to lend US dollar funds against collateral eligible in the Banks short-term repos and US Treasuries.
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An operation to lend $30 billion funds for a week would take place today, alongside an operation to lend funds overnight and the size of the Banks overnight dollar repo operation would be $10 billion today, a Bank of England statement said.
Besides, the bank would conduct weekly auctions and accept mortgage-backed securities as collateral from Monday.
The first such operation will be an auction for 40 billion pound maturing on 15th January, 2009.