The resources of the central bank of the world's second strongest economy have now been marshaled to address the global financial crisis.

The European Central Bank, led by President Jean-Claude Trichet has shifted policy - - a remarkable, historic change - - and is now working in coordination with its companion major central banks - - the U.S. Federal Reserve, Bank of England, Bank of Japan, and the Bank of China - - and others, to end a credit crisis that threatens to cripple international business and seriously damage economies, worldwide.

A legendary inflation hawk,Trichet, whose ECB lowered its key, short-term interest rate by 50 basis points in conjunction with the other major central banks on Wednesday, declined to rule out further steps to solve the crisis, including additional interest rate cuts, Bloomberg News reported Thursday.

ECB: banks offered unlimited cash at 3.75%

Further, and equally significant, Trichet offered banks unlimited cash at 3.75% to help them cope with tight credit markets, Reuters reported Thursday. Previously, the ECB had offered funds to the highest bidders, a tactic that pushed average rates as high as 4.99% - - almost 75 basis points above the official rate.

In addition, the ECB cut in half the premium it charges for overnight emergency loans and increased the interest rate it pays on deposits, Reuters reported Thursday.

Economist Peter Dawson told BloggingStocks Thursday the ECB's unlimited cash decision and cut in overnight interest rates are likely to be more important than the well-publicized, coordinated interest rate cut by the major banks in solving the financial crisis.

"Wow. What a reversal by the ECB. It's Trichet's 'cash cavalry' on the march. Trichet is effectively flooding the market with liquidity," Dawson said. "The actions will help compensate for the lack of bank-to-bank lending."

Still, Dawson was reluctant to forward predictions regarding the impact of the above policy changes on the financial crisis.

"There are still too many unknowns and we're still too early in this thing. Exactly how much bad debt is out there? $2 trillion? More? Each day we learn about a new problem area, someone else with bad debt exposure, so until we get hold of all these bad securities, predictions are not meaningful," Dawson said. "I'll just put the ECB's actions this way – they're positive data points for bank credit supply. Hopefully, they will improve credit market conditions."

Monetary Policy / Economic Analysis: Keep your eye on overnight interest rates and companies' ability to get short-term loans - - known as floating commercial paper. These money lines are keys to commercial activity and to preventing something worse than a mild recession from occurring.