The U.S. Federal Reserve led an unprecedented push by central banks to flood financial markets with dollars, backing up government efforts to restore confidence in the banking system.

The ECB, the Bank of England and the Swiss central bank will offer unlimited dollar funds in auctions with maturities of seven days, 28 days and 84 days at a fixed interest rate, the Washington-based Fed said today. The Bank of Japan may introduce ``similar measures.'' The dollar declined and some money-market rates fell.

Policy makers from the Group of Seven nations pledged at the weekend to take ``all necessary steps'' to stem a market panic after the MSCI World stock index plunged 20 percent last week. Central banks last week cut interest rates in tandem for the first time since 2001, the U.S. plans to buy $700 billion in distressed assets from banks and in Europe, the U.K. is leading a push to keep lenders afloat with taxpayers' money.

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``By providing unlimited dollar funds they are acting on the back of the G-7 plan to ensure the system is fully liquidized,'' said Lena Komileva, an economist at Tullet Prebon Plc in London. ``We're going to see even more liquidity provided and more aggressive rate cuts are coming.''

`Funding Stresses'

The dollar dropped after the announcement, falling as much as 0.9 percent to $1.3671. The cost of borrowing in euros for three months declined to 5.32 percent today from 5.38 percent, according to the European Banking Federation. Stocks rallied worldwide, with the MSCI World Index climbing 2 percent.

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