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US central bank in $25bn auction

LONDON, August 13 – The US Federal Reserve has auctioned $25bn (£13.1bn) in loans to banks in its latest bid to boost credit markets.

The results of Monday\’s auction were revealed on Tuesday and showed the auction was oversubscribed with 64 bidders seeking $54.8bn from the bank.

This latest auction involved lending firms money for 84 days – rather than the 25 days of previous auctions.

The central bank took the unusual move of auctioning loans in December as banks found it harder to access money.

Since then the Federal Reserve has had more than 10 such auctions.

Traditionally emergency funding is an option only open to commercial banks.

Banks have been reluctant to lend to each other since the credit squeeze started last year, making it harder for firms and individuals to access capital.

The latest loans carry an interest rate of 2.254%.

Last week the US central bank left interest rates on hold at 2%, on fears that further cuts could fuel inflation further.

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