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Why is the Fed pumping money into the banking system?

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The US central bank has pumped more than $200bn (£160bn) into the financial system this week - the first time there's been such an intervention since 2008.

There is an expectation that more is to come as the Federal Reserve aims was to stabilise what is usually a calm part of the market.

Interest rates in the so-called "repo market" had shot up to 10% in some cases - although the cost of borrowing in that market more typically hovers around the benchmark rate set by the Fed - around 2%.

There's more here.

Why does the US have a short-term funding problem?

Today Programme

BBC Radio 4

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Emergency plumbing is always a somewhat ominous sign. And that, in a financial sense, is what the US central bank has had to do this week - pump in cash to flush out a blockage in the system caused by a shortage of short terms funding available for banks.

It's had to intervene in what's called the repo - or repurchase market - and is promising to do so again today. The last time the Federal Reserve had to do this was during the financial crisis in 2008.

Jane Foley, head of FX strategy at Rabobank told Today: "It's the very important plumbing of the liquidity system. Generally with plumbing systems, we don't want to pay a lot of attention to it."

She said it wasn't completely clear why there was a sudden shortage of liquidity, but it could be to do with the fact that in the last week the Treasury sold a lot of debt, which "sucks" liquidity out of the system.

"It's also around a time where tax payments have to be pay again at some stage, which takes more liquidity out of the system," she added.

"But generally, since the global financial crisis, banks have had more regulation, they have to hold more cash with perhaps again more availability of cash in the system and the central bank is also thinking of selling some of these bonds that it has bought as a consequence of quantitative easing and that too has been sucking liquidity out of the system."