The US Federal Reserve today led another intervention to ease global liquidity by joining the European Central Bank (ECB) and the Swiss National Bank (SNB) in efforts to flood the Continent with dollars while pumping a further $50 billion (£25.3 billion) into the American financial system.

The Fed will swap a further $20 billion worth of dollars for euros with the ECB, on top of the $30 billion the two central banks have already exchanged with each other.

In addition, the US Fed will swap $6 billion for euros with the SNB, bringing the total exchange between the banks to $12 billion. The move will help inject dollars into the European wholesale market where the availability of the greenback appears to have dried up as the credit crunch worsens.

Previously, European banks borrowed euros from their central lenders, which they then used to buy dollars in the wholesale market where banks sell money to each other. But this inter-bank business has effectively dried up.

The Fed also announced today that it will make funding available in the US, just two days after cutting the interest rate by a quarter point to 2 per cent, the lowest since December 2004.

The US Fed will increase the amount it offers to US retail banks in an auction from $50 billion to $75 billion. The auction is held every two weeks, with the first of two auctions beginning on May 5 and the total that banks now have access to has increased from $100 billion to $150 billion.

The Bank of England did not get involved in today's US-European intervention, stating: "We have not been seeing evidence that the London market is short of dollars so we did not see a need for the Bank to participate.

"But we did know about the announcements and are supporters of the efforts of other central banks in the money markets."

The Bank did, however, choose to increase the amount to was prepared to offer British lenders to £2.5 billion as part of its normal money market operations.

Britain's next interest rate decision will be made by the Bank next week. It widely expected the Bank of England will keep borrowing costs unchanged at 5 per cent after the quarter point cut in April.

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