When a central bank makes a short-term loan to a member institution, it is said to be injecting liquidity. In the United States, the Federal Reserve maintains a target federal funds rate for banks to loan money overnight to each other. If the lending banks are unwilling to offer enough credit at this rate, the central bank may step in and make loans itself through the discount window. In this role, the central bank is operating as the lender of last resort and is said to be injecting liquidity.
Ofer Abarbanel is a 25 year securities lending broker and expert who has advised many Israeli regulators, among them the Israel Tax Authority, with respect to stock loans, repurchase agreements and credit derivatives. Founder of TBIL.co STATX Fund.