Fed pumps two billion dollars into US financial system

The Federal Reserve on Monday pumped two billion dollars into the jittery US
financial system just after the stock market opened, the Federal Reserve Bank of
New York said.

The Fed injected tranches totaling 62 billion dollars Thursday and Friday
into the financial markets to ease tightening credit linked to the crisis in the
US subprime mortgage sector.

In a statement Monday before the financial markets opened, the New York Fed
said that it "stands ready to conduct additional operations later in the day as
needed."

The latest injection is much smaller than the central bank’s massive 38
billion dollars pumped into the banking system Friday, its biggest operation
since the week of the September 11, 2001, terror attacks.

On Thursday the central bank pumped 24 billion dollars into the market, amid
sharp falls on global stock markets which were triggered by fears over the
multitrillion-dollar US mortgage market and a related credit crunch.

It said it would also "provide reserves as necessary through open market
operations" to keep its short-term federal funds interest rate close to its 5.25
percent target and to boost liquidity.

The credit squeeze has occurred as banks revaluate their exposure to the
housing sector amid surging home foreclosures.

The Fed moved amid fears on Wall Street that the widening credit crunch could
stoke interest rates on bank and commercial loans and slow US economic
growth.

The central bank’s actions appeared Monday to assuage some Wall Street
concerns, with the Dow Jones Industrial Average up 0.67 percent at 13,327.90 in
morning trade.

The European Central Bank also acted Monday, injecting 47.66 billion euros
(65.06 billion dollars) into the money market to address liquidity shortages
amid growing fears about the US home loan sector. On Thursday and Friday it had
added a combined 155.85 billion euros (212.98 billion dollars) to eurozone
markets.

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