The US Federal Reserve this afternoon announced the creation of a temporary short-term lending facility to ease credit market strains in concert with market-calming actions by several other major central banks.
The Fed, the US central bank, said it would launch a "temporary term auction facility" that banks can use to secure loans at its discount window.
"This facility could help promote the efficient dissemination of liquidity when the unsecured interbank markets are under stress," the Fed said in a statement.
The announcement comes a day after the Fed trimmed benchmark interbank interest rates by a modest quarter percentage point to 4.25 per cent and cut the discount rate it charges banks for loans by the same amount, to 4.75 per cent.
That disappointed investors and stock markets tumbled sharply, but within minutes of the US stock market's open on Wednesday a large part of those losses had been erased as investors saw the Fed action as likely to help settle markets.
The Fed's announcement was made in concert with the unveiling of other actions by the Bank of Canada, the Bank of England, the European Central Bank and the Swiss National Bank. The Bank of Japan and Sweden's Riksbank also made statements.
Institutions in good standing that are eligible to borrow from the discount window can participate in the auctions, the first of which is scheduled for Monday, the Fed said. Four auctions are scheduled in total, with more possible depending on how market conditions evolve.