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"The purpose of these actions [cut in dollar swap rate] is to ease strains in financial markets"
- The Federal Reserve System
The Federal Reserve Wednesday decreased dollar borrowing costs for European central banks by cutting rate on existing U.S. dollar liquidity swap arrangements by 50 basis points, or 0.5 percent. This action will provide cheaper dollar liquidity for financial companies.
"The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity," the Fed said Wednesday in a statement.
"It's a step in the right direction," said Jay Bryson, global economist with Wells Fargo Securities in Charlotte, North Carolina. "It doesn't solve the problem in Europe, but to the extent that European banks are having trouble raising dollar funding, it makes it easier and less costly for these banks to borrow dollars."