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The Bank of England offered extra cash to banks in the first short-term emergency operation for six months, joining the U.S. Federal Reserve in an attempt to prevent a financial-market meltdown.

“This action is being taken in response to conditions in the short-term money markets this morning,'' the U.K. central bank said in a statement today in London. “The bank will take actions to ensure that the overnight rate is close to bank rate. Along with other central banks, the Bank of England is closely monitoring market conditions.''

The U.K. central bank's move follows the Fed's reduction of the discount rate yesterday, the first weekend action of its kind in more than three decades. The U.S. authorities' rescue of Bear Stearns Cos., Wall Street's fifth-largest securities firm, sent the dollar to record lows against the euro and Swiss franc and world equity markets tumbling.

“Clearly we're very much still in the throes of this process,'' said Richard McGuire, an economist at Royal Bank of Canada in London. “The risks to the downside are mounting. While the rest of the world is clearly implicated, it's still primarily a U.S. problem. The U.K. is under threat.''

The Bank of England offered 5 billion pounds ($10 billion) of three-day reserves in an “exceptional'' fine-tuning operation. The bank received bids for 23.6 billion pounds of funds, almost five times more than the amount it awarded, the bank said in a statement.

`Close Contact'

“As you would expect, the Tripartite authority, that is the Bank of England, the Treasury and the Financial Services Authority, have been in close contact with their U.S. counterparts over the weekend and continue to closely monitor the markets,'' Michael Ellam, a spokesman for Prime Minister Gordon Brown, told journalists in London today.

Brown said in Parliament today that “we will at all times remain vigilant and will take whatever actions necessary in order to maintain economic stability and growth.''

The pound fell as much as 0.8 percent against the dollar after the bank announced the operation today. It traded at $2.0011 as of 4:12 p.m. in London. The dollar fell below 96 yen today for the first time in 12 years.

The Bank of England has lowered the benchmark interest rate twice since December to 5.25 percent to shield economic growth from the effects of a potential recession in the U.S http://payday-nofax.com. Banks have curtailed lending to one another, with the three-month inter- bank lending rate for pounds climbing to 5.96 percent today, the highest this year.

Rate Cut

“We suspect May'' will be the month of the next U.K. interest-rate cut, James Knightley, an economist at ING Financial Markets in London, said in an interview with Bloomberg Television. “But, given the latest financial market uncertainty, if we get some steep equity market falls, that actually could bring that forward.''

Amit Kara, an economist at UBS AG, brought forward his call for the next central bank rate reduction to April from May to reflect “events in the U.S. over the past three days,'' he said in a statement. He kept his forecast that the benchmark will fall 1 percentage point this year.

Today's Bank of England action provides funds equivalent to 25 percent of commercial banks' reserves targets, and the range around the targets remains at 30 percent, the bank said. It will keep the range under review, the statement said.

Bear Stearns

The Fed lowered the so-called discount rate by a quarter of a percentage point to 3.25 percent and also will lend to the 20 firms that buy Treasury securities directly from it. It will provide up to $30 billion to JPMorgan Chase & Co. to help it finance the purchase of Bear Stearns.

Global stock markets have lost $2.4 trillion in market value from a peak in October to $60 trillion as of March 14, partly reflecting the slump in the U.S. dollar, which has boosted the value of European and Asian equities.

In a report today, the Bank of England said information from contacts and financial market prices in February signaled “difficult conditions'' may continue for some time, threatening to slow economic growth.

“This could act as a drag on economic activity and in turn prompt further deterioration in the quality of banks' assets and limit their ability and willingness to lend,'' the central bank said in its quarterly bulletin released today in London.

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