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How exactly do central banks stabilise a money market?
Regarding the current financial turmoil, I read on t'internet that "The Bank of England and the European Central Bank said they were monitoring developments and had pumped £5bn and $30bn respectively into money markets to help stabilise them."

What is the process by which this injection of cash actually gets to the market and how it stabilises it?
asked in finance, money, banks

Answers

siasl74 answers:

The injection of cash is either from reserves (most likely) or just invented (less likely as it has a detrimental effect on the economy).

How it stabilises things? Well, the current turmoil is being exacerbated by various funds divesting themselves of stock, so this cash helps stall that process. They'll probably release that cash into the market as cheap loans to the large players.


3 years ago / reply

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