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From Staff Reports
While central banks in the United States and Europe did their best to infuse their respective economies with liquidity, central banks in China and Japan were doing just the opposite. The People's bank of China last week sold $20 billion worth of three year treasury bills hoping to siphon off excess funds and cool off its economy.
Meanwhile the credit crunch that has taken hold in the United States and Europe introduced the largest injection of funds since early August into the banking system. The Federal Reserve injected $31.25 billion of liquidity, the largest single-day amount since August 10, while the European Central Bank (ECB) lent banks an extra $58 billion and The Fed's decision to add liquidity was prompted by the need to keep the primary funds rate at its target level of 5.25%.
China, by contrast, raised the level of funds banks are required to set aside for the seventh time this year. Japan, which, after a decade of inflation has the lowest interest rates in the world, is also moved its rates higher, from 0.43% to the target 0.5%.