LIBOR falls to new low

The cost of three-month dollar loans between banks fell Monday to a new low after some cautiously optimistic comments from the finance ministers of the world's eight leading industrial nations. At their weekend meeting in Lecce, Italy, the G-8 finance ministers acknowledged "signs of stabilization in our economies" but added that it was too early to withdraw massive fiscal and monetary stimulus because the fallout from the financial and economic crisis wasn't over. The British Bankers' Association said the rate on three-month loans in dollars — known as the London Interbank Offered Rate, or Libor — was down 0.01 of a percentage point to 0.61 percent. Though the Fed is expected to keep its benchmark rate unchanged at a range between zero and 0.25 percent for a few months yet, the markets are beginning to price in the possibility that rates may start to rise by the beginning of next year if the recent improvement in economic indicators continues. The equivalent rates for three-month loans in euros — known as the European Interbank Offered Rate, or Euribor — fell 0.01 of a percentage point to 1.25 percent while the British rate was unchanged at 1.25 percent. Interbank lending rates are important for the wider economy because they determine the cost of loans for households and businesses. They shot higher during the credit crunch but have been coming back down in recent weeks in the wake of massive efforts by governments and central banks to get lending going again.