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| Bank seeks to ease credit worries | |
| (about 10 hours later) | |
| The Bank of England is set to offer lenders £11.4bn in funds as it tries to limit the impact of a global credit crunch and high borrowing costs. | |
| It is one of five central banks that have pledged to inject $100bn (£49bn) of emergency cash into money markets. | It is one of five central banks that have pledged to inject $100bn (£49bn) of emergency cash into money markets. |
| The aim is to cut the cost of lending between retail and commercial banks, which has jumped in the past few weeks. | The aim is to cut the cost of lending between retail and commercial banks, which has jumped in the past few weeks. |
| Should the borrowing costs stay high, then they may end up being passed on to | |
| consumers, slowing economic growth. | |
| On Monday, the US Federal Reserve made $20bn available through auction, though it did not say how many banks took advantage of the extra money. | On Monday, the US Federal Reserve made $20bn available through auction, though it did not say how many banks took advantage of the extra money. |
| US Treasury Secretary Henry Paulson said on Monday that there was no "silver bullet" to solve the credit market problems. | US Treasury Secretary Henry Paulson said on Monday that there was no "silver bullet" to solve the credit market problems. |
| Cash lube | Cash lube |
| Analysts said the extra cash was needed because the interbank lending rate had remained stubbornly high despite interest rate cuts in the UK and US. | Analysts said the extra cash was needed because the interbank lending rate had remained stubbornly high despite interest rate cuts in the UK and US. |
| Global financial markets have been dealing with a number of problems | Global financial markets have been dealing with a number of problems |
| In London, a key banking rate, called the Libor, dropped for a third session on Monday, signalling that the central banks' rescue plan may be having an effect. | In London, a key banking rate, called the Libor, dropped for a third session on Monday, signalling that the central banks' rescue plan may be having an effect. |
| The Libor, which stands for the London Inter-bank Offered Rate, dipped to 6.431%, compared with 6.627% on Wednesday last week when the central banks unveiled their rescue plan. | The Libor, which stands for the London Inter-bank Offered Rate, dipped to 6.431%, compared with 6.627% on Wednesday last week when the central banks unveiled their rescue plan. |
| The lower the rate, the cheaper it is for banks to borrow money. | The lower the rate, the cheaper it is for banks to borrow money. |
| As well as the Bank of England and Fed, the European Central Bank and the national banks of Canada and Switzerland are also involved in the plan. | As well as the Bank of England and Fed, the European Central Bank and the national banks of Canada and Switzerland are also involved in the plan. |
| The main reason banks have been unwilling to lend to each other is a downturn in the US property market. | The main reason banks have been unwilling to lend to each other is a downturn in the US property market. |
| A surge in mortgage defaults and bad debts has forced many banks to cut the value of their mortgage investments, costing them billions of dollars. | A surge in mortgage defaults and bad debts has forced many banks to cut the value of their mortgage investments, costing them billions of dollars. |
| As a result, the banks fear that they might need any spare cash they have to cover their losses. | As a result, the banks fear that they might need any spare cash they have to cover their losses. |
| The move comes as the UK's Treasury select committee prepares to question Bank of England governor Mervyn King. | The move comes as the UK's Treasury select committee prepares to question Bank of England governor Mervyn King. |