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.