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Why is the Fed pumping money into the banking system?
The US central bank has pumped more than $200bn (£160bn) into the financial system this week - the first time there's been such an intervention since 2008. The Federal Reserve's aim was to stabilise what is usually a calm part of the market. Interest rates in the so-called "repo market" had shot up to 10% in some cases - although the cost of borrowing in that market more typically hovers around the benchmark rate set by the Fed - around 2%. So what happened and should we worry? First things first: what's the repo market? Banks, hedge funds and other players borrow money regularly on a short-term basis to ensure ... (full story)
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