LONDON - THE cost of three-month loans between banks fell further on Wednesday ahead of key interest rate decisions and some signs that confidence was returning, albeit slowly, to markets.
The interbank lending rate on three-month loans in dollars - known as the London Interbank Offered Rate, or Libor - dipped 0.01 percentage points to around 1.40 per cent, according to the British Bankers' Association.
Meanwhile, the rate for three-month loans in euros - known as the European Interbank Offered Rate, or Euribor - decreased around 0.03 percentage points to just below 2.76 per cent. The equivalent rate for pounds fell 0.04 percentage points to around 2.57 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 during the financial crisis as banks have hoarded cash and worried that other lenders might collapse and not pay them back.
All three lending rates remain above the rates markets think benchmark interest rates will be in three months time.
Though the US Federal Reserve cannot cut its benchmark rate further from the current 0-0.25 per cent, both the European Central Bank and Bank of England are widely expected to reduce their rates.
The Bank of England is predicted to cut its rate by as much as a full percentage point Thursday from the current 2.00 per cent. The European Central Bank is also widely tipped to reduce its rate from the 2.50 per cent next Thursday after a raft of downbeat economic activity data and lower-than-anticipated inflation. -- AP
