They are making it worse. Much worse.
The US Federal Reserve and several other major central banks announced a coordinated effort Sunday night to boost the flow of US dollars through the global financial system with the aim of keeping credit flowing to households and businesses.
“The Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Federal Reserve, and the Swiss National Bank are today announcing a coordinated action to enhance the provision of liquidity via the standing US dollar liquidity swap line arrangements,” the central banks said in a joint statement.
The swap line between US Federal Reserve and the ECB, for example, enables the ECB to receive US dollars in exchange for an equivalent amount of euros. The ECB can then distribute those dollars to commercial banks in the 20 countries that use the euro.
The agreements can be an important tool for preserving financial stability and preventing market tension from affecting the economy, according to the ECB. During the global financial crisis of 2008 following the collapse of Lehman Brothers, funding markets dried up because of an extreme aversion to risk. Under these circumstances it became difficult for euro area banks to obtain US dollars.
From Monday through at least the end of April, the Fed and other central banks will make dollars available on a daily basis, rather than weekly.