The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the US Federal Reserve and the Swiss National Bank have agreed to strengthen their liquidity provision through a US dollar swap line arrangement from this Monday until next April.
The idea is to improve the effectiveness of the swap lines, with which it seeks to address any possible shortage of dollars that could have affected the financial markets.
These negotiations between central banks are not new, but they are part of the usual strategy of central banks when problems arise and in this case it is to provide reassurance in the latest episode of banking turmoil causing undue stress on the financial system.
With this agreement, it is sought that the central banks that currently offer operations in US dollars increased «the frequency of trades with a 7-day expiration, from weekly to daily”, they explained.
With this support, which will last until next April, the idea is to have liquidity support to alleviate tensions in the global financing markets.
Although this deal has divided analysts over the effect that the decision may have on monetary policy while the United States Federal Reserve (Fed) prepares to set interest rates tomorrow Wednesday.
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