Barclays: BoE may revive auctions

10 March 2008

Barclays Capital has said that the Bank of England (BoE) may take a lead from the Federal Reserve and revive auctions in a bid to ease the strain of the money markets following an increase in the cost of borrowing, it has been reported.

Ahead of a meeting of bankers to be held today in Basel, Switzerland, the bank is coming under increasing pressure to restart its emergency cash auctions, Bloomberg said.

Paul Robinson, a currency strategist at Barclays, said: "Things are getting worse rather than better."

"Confidence just isn't there, liquidity is tightening."

He added that this means there is a very good chance that the UK's central bank will restart the auctions.

The deputy governor of the BoE noted that the Federal Reserve said it would increase the amount of loans it makes to banks during March in order to tackle the credit crunch threatening a recession in the US economy.

Bloomberg today reported that wholesale-price inflation in the UK has reached its fastest annual pace since 1991.

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