The interbank lending rate on three-month loans in dollars - known as the London Interbank Offered Rate, or Libor - dipped over 0.04 percentage points to a tad above 1.35 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 0.04 percentage points to just below 2.72 per cent. The equivalent rate for pounds fell around 0.07 percentage points to just above 2.50 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 levels markets think benchmark interest rates will be in three months time.

Though the U.S. Federal Reserve cannot cut its benchmark rate further from the current 0-0.25 per cent, the European Central Bank is widely expected to reduce their rates after a raft of downbeat economic activity data and lower-than-anticipated inflation.

The Bank of England cut its main rate by half a percentage point Thursday to 1.50 per cent, after the Libor rates were fixed, and is widely predicted to reduce borrowing costs further in the months to come. -- AP