WASHINGTON: Federal Reserve chairman Ben Bernanke signaled a willingness to consider an early cut in the benchmark interest rate to quell market unrest, a key US legislator said yesterday after meeting with the Fed chief, sending Wall Street higher.
However, the US Treasury Secretary cautioned it would take time for the credit crisis to play out.
US stocks rose after Senator Christopher Dodd, who chairs the Senate Finance Committee, said Bernanke was "absolutely" willing to use all available tools to ease a credit squeeze that has limited companies' ability to raise funding.
Capital markets remained tight and many investors were calling on the Fed for a cut in its benchmark interest rate, policymakers' main monetary tool.
Nervous investors piled into short-dated Treasury notes and bonds, a traditional sanctuary from volatile markets, driving prices higher for a ninth straight session.
"Portfolios are in hyper-risk-averse mode," said Joseph Di Censo, fixed-income strategist at Lehman Brothers in New York.
The Fed has already stepped in with billions of dollars in temporary reserves in recent days, plus Friday's surprise half-point cut in the discount rate on direct loans to banks.
The US Federal Reserve injected $3.75bn into the distressed financial system, seeking to unblock a credit crunch that has upset markets around the world.
The Federal Reserve Bank of New York, which handles such operations for the Fed, announced the infusion on its website.
The latest injection brought the total to $101.25bn dollars added to money markets in repurchase agreements since August 9, when central banks began a series of major cash infusions to ease tightening credit due to a crisis in the US high-risk subprime mortgage sector.
Japan's central bank said it would inject 800bn yen ($7bn) into the financial system to ensure there are ample funds amid concerns about tightening global credit.
The Bank of Japan moved to pump extra funds into the money market for a fourth straight working day as part of a concerted global drive by major central banks to calm fears about the fallout from US mortgage problems.
The BoJ's move aims to curb a rise in short-term interest rates caused by increased demand for new funds.
The ECB lent a total of 275 billion euros ($371.1bn) to banks for a week, 46bn more than it estimated they needed for routine weekly financing.
The Bank of England said it lent 314 million pounds ($624m) through its standing facility in the previous session, the first time it has been tapped in more than a month.
Capital One Financial Corporation, best known for its US credit card business, said it will cut 1,900 jobs and shut down a wholesale mortgage unit it acquired less than a year ago.
US Treasury debt climbed again yesterday, extending the previous session's huge rally, pushing yields lower and suggesting that the Fed's steps so far have done little to settle capital market nerves.
