• Home
• /
• Business

Dollar interbank rates little changed

LONDON - The cost of three-month dollar loans between banks was unchanged for the third day running Friday amid ongoing skepticism surrounding a raft of measures by the Obama administration to boost confidence in the U.S. economy.

The British Bankers’ Association said the rate on three-month loans in dollars - known as the London Interbank Offered Rate, or Libor - was unchanged again at 1.25 percent.

Libor rates have barely budged over the last couple of weeks despite a run of policy initiative from President Barack Obama as ongoing concerns about the state of the U.S. economy and its banking system in particular continue to weigh on sentiment.

Earlier this week he unveiled a $75 billion package of measures to breathe life back into the U.S. housing market, considered by many to be the main reason why the world economy is in the doldrums.

The housing package came in the wake of the president’s signing of the $787 billion stimulus bill and U.S. Treasury Secretary Tim Geithner’s bank rescue plan, which could see up to $2 trillion ploughed into the financial system.

Meanwhile, the rate for three-month loans in euros - known as the European Interbank Offered Rate, or Euribor - decreased around 0.01 percentage points to a record low of 1.88 percent and further below the European Central Bank’s 2 percent benchmark rate.

The equivalent three-month Libor rate for pounds was unchanged for the second day running at 2.07 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 during the financial crisis as banks have hoarded cash and worried that other lenders might collapse and not pay them back.

Though the interbank lending rates have fallen from last autumn’s previous highs in the wake of large interest rate cuts around the world and massive central bank liquidity provisions, all three rates remain above the levels markets think benchmark interest rates will be in three months.

While the U.S. Federal Reserve cannot cut its benchmark rate further from the current 0-0.25 percent, the European Central Bank is expected to reduce its rate again from the 2 percent benchmark, and the Bank of England is expected to cut its rates further in the coming months from its record low of 1.0 percent.