The Federal Reserve will inject some $64 billion into the global economy, fearing that the ongoing credit crunch could spark recession. In the most significant international economic cooperation since 9/11, the Fed will supply up to $24 billion to the ECB and other central banks to ease the money supply in Europe; meanwhile four auctions stateside will make available at least $40 billion to US markets, Bloomberg reports.
The action comes after the latest interest rate reductions failed to ease concern about rising borrowing costs. Officials are discouraged also that banks aren’t taking loans from the Fed despite low discount rates; thus the auctions, in which the rates could fall further to achieve the desired liquidity. Stocks climbed in the US and in Europe on the infusion news. "This is shock and awe,'' one strategist told Bloomberg.