A group of the world’s most important central banks got together today and announced temporary measures that are designed to boost liquidity and ease the pressure on the short-term money markets, by injecting more money into the system and expanding the sort of collateral they will accept for these sorts of transactions.

The U.S. Federal Reserve, the Bank of Canada, the Bank of England, the European Central Bank, and the Swiss National Bank jointly announced the initiative to inject more liquidity into the markets that have suffered since the credit markets were disrupted in mid August.

The Bank of Canada announced that it will enter into term purchase and resale agreements extending over the calendar year-end. It will offer $2 billion on December 13, maturing January 10, 2008; and minimum $1 billion agreements on December 18, maturing January 4, 2008.

These transactions will temporarily add assets to the Bank of Canada’s balance sheet, offsetting the anticipated seasonal increase in the demand for bank notes.

It is also temporarily expanding the list of securities that are eligible to collateralize these Term PRA transactions. The list of eligible securities includes: securities issued by the Government of Canada, securities guaranteed by the federal government, securities issued or guaranteed by a provincial government, and bankers’ acceptances and bearer deposit notes with terms to maturity of less than 180 days.

In the United States, the Fed is establishing a temporary Term Auction Facility, and foreign exchange swap lines with the ECB and the Swiss central bank, the SNB. The Fed says that the new TAF will allow it to inject funds through a broader range of counterparties and against a broader range of collateral than open market operations, and this could help promote the efficient dissemination of liquidity when the unsecured interbank markets are under stress.

The first TAF auction of US$20 billion is scheduled for December 17 for funds maturing January 17, 2008. Another auction of up to $20 billion is scheduled for December 20, maturing January 31, 2008. The third and fourth auctions will be held on January 14 and 28, for amounts that are to be determined in January.

Additionally, the Federal Open Market Committee has authorized temporary swap lines that will provide up to $20 billion to the ECB and $4 billion to the SNB, for use in their jurisdictions, as part of the new TAF.

Also, the Bank of England is raising the amounts that will be offered through its already-scheduled long-term repo open market operations. The total size of reserves offered in the operations on December 18 and January 15 will be raised from £2.85 billion to £11.35 billion, of which £10 billion will be offered at the three-month maturity. The BoE will also accept a wider range of high quality securities as collateral against funds advanced at the 3-month maturity.

Commenting on these actions, the Bank of Japan said it welcomes these measures and hopes that they will contribute to maintaining the functioning of the international financial markets. It added that Japan’s money markets function well and the Bank will continue to conduct money market operations so appropriately as to maintain market stability, including supplying sufficient funds over the year-end.

Sweden’s Riksbank also welcomed the measures. “In Sweden we do not currently see that the banks have any additional need to borrow money in the short term. We are monitoring developments closely and are, as always, ready to take the necessary measures if the need should arise,” said its governor Stefan Ingves.