Monday, Nov 3, 2008
Dollar borrowing costs fell in London on speculation European central banks will cut interest rates this week, joining China and India in trying to limit the ravages of a likely global recession.
The London interbank offered rate, or Libor, that banks charge one another for three-month loans in U.S. currency slid 17 basis points to 2.86 percent today, a 16th day of declines, data from the British Bankers’ Association showed. It hasn’t been as low since the failure of Lehman Brothers Holdings Inc. on Sept. 15. The overnight rate dropped 2 basis points to 0.39 percent. Asian rates declined.
“Interest-rate cuts will help,” said Jan Misch, a money- market trader in Stuttgart at Landesbank Baden-Wuerttemberg, Germany’s biggest state-owned lender. “The most important factor is that we haven’t had bad news in terms of corporate or bank trouble for a few days. My view is that sentiment in the money market will improve further this week.”
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The European Central Bank and Bank of England will lower their benchmark interest rates by 50 basis points on Nov. 6, according to Bloomberg surveys. The Reserve Bank of Australia will also cut its overnight cash rate target by 50 basis points tomorrow, economists predict. India and China reduced borrowing costs in the past week.
Interest-rate cuts from Beijing to Oslo to Washington represent another salvo from central banks in their efforts to thaw a more than year-long freeze in credit. The U.S. committed $700 billion to bail out financial institutions, while policy makers in Europe have offered unlimited funding to revive lending.
The Libor for three-month euros fell 3 basis points to 4.74 percent, the 18th straight decline, according to BBA data.