NEW YORK -- The Federal Reserve took the unusual step of refraining from undertaking an open market operation Tuesday, in the aftermath of last week's substantial infusions of liquidity into the banking system.
This marked a pause in the Fed's actions over the past three trading days when it injected a substantial amount of cash into the market to increase liquidity.
Tuesday was the first working day in three months that the Fed had not undertaken an open market operation.
Global central banks have scaled back their cash injections so far this week after the hefty additions of funds they pumped into financial systems last week in efforts aimed at calming jittery credit markets.
The Fed refrained from undertaking a money market operation at its usual operating time of 9:30 a.m. EDT, a New York Federal Reserve spokesman confirmed.
The New York Fed had said earlier in a statement on its Web site that it was evaluating whether or not to conduct a market operation at that time.
Federal funds, bank reserves which trade in the overnight market, last traded at 4.00 percent, below the 5.25 percent rate the Fed targets.
Earlier on Tuesday, the European Central Bank injected 7.7 billion euros ($10.6 billion) and the euro short-term money market held steady.
In contrast, the Bank of Japan on Tuesday drained a total of 1.6 trillion yen ($13.6 billion) from the banking system, reversing two days of cash injections that drove overnight call rates to near zero as global money markets calmed.
The Fed's statement said: "In addition, the Desk stands ready to conduct additional operations later in the day as needed."
That replicated the wording of a statement on the Web site the New York Fed released Monday, when the Fed went on to add $2 billion of temporary reserves to the banking system via an overnight repurchase operation.
On Friday, the Fed added a hefty $38 billion of liquidity — the biggest temporary addition to the banking system the U.S. central bank had made in a single day since Sept. 19, 2001, in the aftermath of the Sept. 11 attacks.
On Thursday, the Fed pumped $24 billion into the U.S. banking system — its biggest single-day cash injection in nearly four months. But that infusion paled in comparison to the ECB's action earlier in the day, when it provided a record 94.8 billion euros ($130 billion) in extra liquidity.
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