Fed Makes Biggest Temporary Injection Since '01 (Into U.S. Banking System) [View All]

Source: Reuters

NEW YORK (Reuters) - The Federal Reserve on Thursday pumped its biggest temporary daily infusion into the U.S. banking system since just after the September 11, 2001 attacks as short-term lending rates rose on both sides of the Atlantic.

Even though some news about bank write-downs from riskier investments was not as dismal as some investors had feared, underlying strains pushed overnight lending rates up in both the United States and Europe.

"There was a bit more focus on the Fed operations today in context of the rise in Libor (London Interbank Offered Rates)," said Tony Crescenzi, chief bond market strategist at Miller, Tabak & Co. in New York.

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The Fed injected $47.25 billion in temporary reserves, its biggest combined daily infusion since September 19, 2001, to calm a rise in overnight interbank lending rates.

"We are seeing tightness in fed funds with concerns about financial institutions' exposure to subprime," said Kenneth Kim, economist with Stone & McCarthy Research Associates, in Princeton, New Jersey.



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