America's Federal Reserve has announced a number of coordinated actions with other central banks, including the Bank of England, to help relieve liquidity in global funding markets.

Ben Bernanke, chairman of the US Federal Reserve, today acknowledged that credit conditions had deteriorated further after he led a group of central banks that pumped a total $236 billion into world bond and currency markets to boost liquidity.

In a statement in Washington, the Fed said that $200 billion would be lent to banks after "liquidity pressures in funding markets...recently increased again". It also extended the length of such loans from overnight to 28 days.

In London, the Bank of England will lend £10 billion on March 18 and a further amount, as yet undisclosed, on April 15. The European Central Bank, the Bank of Canada and the Swiss National Bank also joined in today's action.

The Bank of England, which last week opted to leave the UK interest rate at 5.25 per cent, said the world's global banks "consult regularly on liquidity problems in funding markets", adding: "Pressures in some of these markets have recently increased again."

The Dow Jones industrial average jumped 268.90 points to 12,010.50 on opening while London's FTSE 100 index of blue chip companies rose 147 points to 5,776.

The cheap lending facility makes commercial banks more confident to lend money to each other and make transactions themselves because they have a certain supply of funding from America's central bank.

In addition, the Fed said it was injecting $30 billion dollars into the European swap currency market to boost liquidity and also offered $6 billion to the Swiss. Those sums are three times bigger than existing arrangements.

Last week, the Fed increased the amount it would lend banks from $60 billion to $100 billion as fears grew that America was now in a recession.

Ian Shepherdson, senior economist at High Frequency Economics, said: "What this shows is that the arrangements the Fed had in place weren't working. Things have got worse. They are trying to expand the liquidity lending programme."

He pointed out that the Fed move had triggered a "massive" surge of 20 basis points on the yield of US Treasury two year bonds.

Such swap market injections were employed about six months ago, to cope with the immediate effects of last summer's credit crisis, but also just after the terrorist attacks of September 11, 2001.

In the last six months, commercial banks have been wary of lending to each other because they were suspicious of the amount of hidden sub-prime losses their rivals may have been hiding. They were nervous that a borrower may have defaulted even on a low risk overnight loan.

That anxiety led to a drying up of the credit market, which central banks were scared would lead to lending facilities being withdrawn from individuals, a move that would in tunr hit economic growth. Instead, central banks provided cheap, reliable funding for commercial banks themselves.

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