Major Central Banks Including US Fed and ECB Jointly Respond to Provide Dollar Liquidity

[Asia Economy Reporter Jeong Hyunjin] On the morning of the 16th (Korean time), central banks of the United States, Europe, Japan, Canada, the United Kingdom, and Switzerland made a surprise announcement that they would take joint action to strengthen global dollar liquidity supply as financial markets were severely shaken by the spread of the novel coronavirus infection (COVID-19).

The six central banks?the United States Federal Reserve (Fed), European Central Bank (ECB), Bank of Japan (BOJ), Bank of Canada (BOC), Bank of England (BOE), and Swiss National Bank (SNB)?decided to supply 84-day dollar liquidity in addition to the existing 7-day dollar liquidity as of that morning.

Additionally, the central banks agreed to lower the dollar swap rate stipulated in their agreement by 25 basis points (bp) (1 bp = 0.01 percentage points), and accordingly, the new swap rate will be reduced to the level of the dollar overnight index swap (OIS) rate plus 25 bp.

The ECB stated, "We will maintain the new pricing and maturity benefits for an appropriate period to ensure the smooth functioning of the dollar funding market."

This is not the first time the six central banks have cooperated. Whenever financial markets were severely shaken, such as during the global financial crises in December 2007, October 2008, and November 2011, the central banks jointly responded by expanding dollar supply. In 2007 and 2008, five countries excluding Japan simultaneously lowered their benchmark interest rates.

This content was produced with the assistance of AI translation services.