LONDON - THE cost of three-month dollar loans between banks fell further on Thursday in the wake of the US Federal Reserve's decision to cut its benchmark rate to near zero per cent.
The interbank lending rate on three-month loans in dollars - known as the London Interbank Offered Rate, or Libor - fell around 0.05 percentage points to about 1.53 per cent, according to the British Bankers' Association.
The fall came after the Fed cut its Fed funds rate from 1.0 per cent to a range between 0.0 per cent and 0.25 per cent on Tuesday and said it will use 'all available tools to promote the resumption of sustainable growth and to preserve price stability.'
Meanwhile, the rate for three-month loans in euros - known as the European Interbank Offered Rate, or Euribor - decreased around 0.04 percentage points to 3.11 per cent, while the equivalent rate for pounds fell about 0.05 percentage points to 3.00 per cent.
Interbank rates are important because they affect the cost of loans in the wider economy, for both businesses and individuals.
Rates have been high in recent months as banks have hoarded cash and worried that other lenders might collapse and not pay them back.
All three lending rates still remain well above their benchmarks set by central banks - a range of 0-0.25 per cent in the US, 2.00 per cent in Britain and 2.50 per cent in the 15-nation euro zone - suggesting banks are still reluctant to part with their money. -- AP
