While the Fed has set up swap lines to the ECB to help relieve some of the stress in the interbank lending markets, Fed Pres Rosengren is acknowledging that “clear stresses in short term credit markets” still exist. All one has to do is look at the euro basis swap making a new multi year high today to see this. In response to this, Rosengren is saying “crisis might warrant coordinated action by Fed, ECB” according to BN. What this action is he didn’t expand on but would entail likely more liquidity facilities if needed.
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