Fed loans $75bn to finance firms

The US central bank has auctioned $75bn (£38.1bn) in loans to finance firms in a bid to boost access to credit.

This latest auction is the 12th by the Federal Reserve, and brings the total amount auctioned to $510bn since the lending scheme was started in December.

This round was oversubscribed, as firms sought $84bn, in contrast to an undersubscribed auction last week.

The central bank took the unusual step of auctions last year after the US housing slowdown dented credit markets.

The hope is that by enabling banks to borrow this will encourage them to lend funds and ease liquidity problems.

With continued uncertainty over the exposure of banks to the US sub-prime sector - that specialises in offering loans to risky borrowers - banks have been reluctant to lend to each other.

Once banks do have access to capital it allows them to offer credit to customers, who are a key driver of the US economy.

The Federal Reserve has been cutting interest rates in a bid the boost the economy, but analysts now believe the bank is unlikely to embark on any more reductions imminently.

At the end of April the Federal Reserve cut its key interest rate from 2.25% to 2%.

That was the seventh rate cut since last September, when the federal funds rate stood at 5.25%.

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