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Interbank lending rates edge down at year-end

Interbank lending rates edge down at year-end

The cost of three-month loans between banks in the U.S. and Europe dropped again Wednesday as concerted government efforts to shore up confidence in the financial system and massive interest rate reductions helped partially to thaw credit markets.
The interbank lending rate on three-month loans in dollars _ known as the London Interbank Offered Rate, or Libor _ fell 0.01 percentage points to 1.43 percent, 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 2.89 percent. The equivalent rate for pounds fell 0.02 percentage points to around 2.77 percent.
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 remain well above their benchmarks set by central banks _ 0-0.25 percent in the U.S., 2.00 percent in Britain and 2.50 percent in the 15-nation euro zone _ suggesting banks are still reluctant to part with their money.
However, the difference, or spread, between bank lending rates and the official base rates has been coming down consistently back towards 1 percentage point, well down on levels seen in the autumn. Before the credit crunch, widely seen to have begun in August 2007, the difference was only around 0.5 percentage points.


Updated : 2021-03-05 09:59 GMT+08:00