LONDON, Sept 19: The Bank of England announced on Wednesday that it would inject 10 billion pounds ($20bn) into longer-term money markets next week amid the ongoing global credit squeeze.

Until now, the British central bank has refrained from pumping cash into the three-month money markets -- unlike the US Federal Reserve and the European Central Bank.

However, analysts said the development was an embarrassing U-turn for Bank of England (BoE) governor Mervyn King.

King had said last week that providing short-term liquidity to troubled markets “encourages excessive risk-taking and sows the seeds of a future financial crisis.”

But confidence in the banking system was shaken after British bank Northern Rock was forced to request financial assistance from the BoE due to the ongoing global credit squeeze.The BoE said on Wednesday it wanted to address longer-term liquidity issues in the so-called inter-bank market -- where commercial banks lend to each other.

“This represents a U-turn on support for money markets,” said Ian Kernohan, analyst at Royal London Asset Management.

—AFP