Toucan

The US and European central banks are injecting more cash into the frozen money markets to improve liquidity.

The ECB has decided to increase the amount available in its auctions to $25 billion (£12.7 billion), while the Fed is raising its amount from $50 billion (£25.35 billion) to $75 billion (£38 billion).

The operations will be conducted every second week, with a maturity of 28 days, the ECB said.

The Fed is also expanding the range of assets that can be used as collateral to improve conditions.

"In view of the persistent liquidity pressures in some term funding markets, the European Central Bank (ECB), the Federal Reserve, and the Swiss National Bank (SNB) are announcing an expansion of their liquidity measures," the ECB said in a statement.

In addition, the Fed will also extend an existing currency swap arrangement with the ECB and Swiss National Bank.

The arrangements will now provide dollars in amounts of up to $50 billion(£25.35 billion) and $12 billion (£6 billion) to the ECB and the SNB, respectively, representing increases of $20 billion (£10.1 billion) and $6 billion (£3 billion).

As the credit crisis continues and world economic forecasts remain gloomy, central banks have been attempting to prop up the money markets.

The auctions, set up in December 2007, allow financial institutions to access short-term loans from the central banks against a range of collateral.

The latest rise in the amounts made available shows the central banks still consider the financial markets to need assistance.

The Bank of England said it did not participate in the action, however.

A spokesperson said: "We have not been seeing evidence that the London market is short of dollars, and so we did not see a need for the bank to participate.

"But we did know about the announcement and are supportive of other central bank's efforts in the money markets."

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