Fed Acts to Ease Liquidity Pressures

MoneyNews
Friday, March 7, 2008

WASHINGTON -- The U.S. Federal Reserve Friday announced measures to ease liquidity pressures in stressed financial markets.
The measures are intended to "address heightened liquidity pressures in term funding markets," the Fed said in a surprise announcement.

Stock futures initially jumped but quickly turned lower on fears the Fed auction suggested market conditions were worse than many had thought. U.S. Treasury prices pared gains after the announcements. The dollar rose against the yen.

The Fed said it would increase amounts in its Term Auction Facility auctions March 10 and March 24 to $50 billion each, a rise of $20 billion from the amounts announced for each of these auctions.

The central banks said it would increase the amounts of these auctions if conditions warrant. It also said that in a bid to provide "increased certainty" to market participants, it would conduct term auctions for at least the next six months unless market conditions stabilize to the point such auctions are unnecessary.

The Fed also said it would initiate a series of term repurchase transactions that are expected to cumulate to $100 billion.

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