Monday, August 13, 2007

ECB Injects More Liquidity

From the WSJ:

In its third consecutive unscheduled cash injection, the ECB pumped €47.665 billion ($65.28 billion) into euro zone money markets. That follows the €156 billion the bank put into markets last week as overnight lending rates shot up on concerns about European banks' exposure to the U.S. subprime market. The Fed injected $38 billion on Friday, following a $24 billion intervention Thursday.

"The ECB notes that money market conditions are normalizing and that the supply of aggregate liquidity is ample. With this fine tuning operation, the ECB is further supporting the normalization of conditions in the money market," the ECB said in a statement. The Bank of Japan added 600 billion yen ($5.06 billion) on Monday.


The ECB has added a ton of money into the system to ease fears. This is what a central bank is supposed to do. However, a question now emerges: what if another big problem emerges? Will any future ECB actions be considered credible by the market players in all of this? Or will further liquidity be seen as an attempt to throw money at the problem?