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UK welcomes world cash injection UK welcomes world cash injection
(about 1 hour later)
UK Prime Minister Gordon Brown has welcomed a joint plan by the US Federal Reserve and other central banks to ease a credit crunch in financial markets. A joint plan by five central banks, aimed at easing the credit crunch in financial markets, has been welcomed by UK Prime Minister Gordon Brown.
In an interview with the UK's Times newspaper, Mr Brown said there should be more focus on such cooperation. Up to $110bn (£54bn) in loans will be made available to world money markets by central banks including the Bank of England and the US Federal Reserve.
His comments come after it emerged that up to $110bn (£54bn) in central bank loans would be made available to world money markets in an unprecedented step. In an interview with the Times newspaper, Mr Brown said there should be more focus on such co-operation.
Analysts said the bold move is a sign of the severity of the credit woes. The unprecedented move is a sign of the severity of the problems, analysts say.
The Federal Reserve will team up with the European Central Bank and central banks from the UK, Canada and Switzerland to offer the cash loans, to be made available in auctions. Auctions
Such a cooperative act is a first, BBC's Robert Peston said earlier. The Federal Reserve and the Bank of England will team up with the European Central Bank and central banks from Canada and Switzerland to offer the cash loans, to be made available in auctions.
Other analysts pointed out that the actions are on a greater scale to the moves taken by the Fed after the September 11 attacks on America to shore up the economy. Ideally, what we are looking for is the financial institutions to have written off their problems, built up confidence and be willing to lend to each other Peter DunayInvestment bank strategist
Staving off recession Such a co-operative act is a first, BBC business editor Robert Peston said.
Share prices in the US rose sharply after the plan was announced, but have since dropped again. Other analysts pointed out that the actions are on a greater scale than the moves taken by the Fed to shore up the economy after the 9/11 attacks on the US.
Five of the most powerful central banks are taking concerted action to stop a banking crisis turning into a recession, the BBC's Mark Gregory notes. Mr Brown, due in Lisbon for the signing of the new European reform treaty, told the Times the moves were "the co-operative effort I've wanted to see for some time.
The problem is that commercial banks in rich nations have sustained huge losses on investments that have gone sour. "It signals an international desire to act in what has been a period of global financial turbulence."
'Staving off recession'
Share prices in the US rose sharply after the plan was announced on Wednesday, but have since dropped again.
Five of the most powerful central banks are taking concerted action to stop a banking crisis turning into a recession, the BBC's Mark Gregory said.
The problem is that commercial banks in rich nations have sustained huge losses on investments that have gone sour, he said
This has made them reluctant to lend any more money, especially to each other.This has made them reluctant to lend any more money, especially to each other.
By acting together to pump extra funds into the system in the form of loans, the central banks hope to have a bigger impact.By acting together to pump extra funds into the system in the form of loans, the central banks hope to have a bigger impact.
But they are also putting their credibility on the line, our reporter notes. But they are also putting their credibility on the line, our correspondent added.
If the plan fails, it is unclear what else they could do to restore confidence, he adds. If the plan fails, it is unclear what else they could do to restore confidence.
Capital gapCapital gap
Peter Dunay, chief strategist at investment bank Leeb Capital Management in New York, said the new money could only help, but there was a broader problem to consider.Peter Dunay, chief strategist at investment bank Leeb Capital Management in New York, said the new money could only help, but there was a broader problem to consider.
"Ideally, what we are looking for is the financial institutions to have written off their problems, built up confidence and are willing to lend to each other," he told the BBC's World Today programme. "Ideally, what we are looking for is the financial institutions to have written off their problems, built up confidence and be willing to lend to each other," he told the BBC's World Today programme.
"Right now... they do not want to lend - they do not want to lend to the public, they do not want to lend to each other."Right now... they do not want to lend - they do not want to lend to the public, they do not want to lend to each other.
"They don't have the capital, they're very concerned and they're holding a lot of debt that is still a problem for them.""They don't have the capital, they're very concerned and they're holding a lot of debt that is still a problem for them."