Dollar interbank lending rates drop

The cost of three-month dollar loans between banks fell Friday, a day after the Group of 20 world leaders agreed to help struggling countries with extra funds and to regulate financial markets more closely. The British Bankers' Association said Friday that the rate on three-month loans in dollars — known as the London Interbank Offered Rate, or Libor — edged down by 0.005 percentage points to 1.16 percent. The equivalent rate for three-month loans in euros — known as the European Interbank Offered Rate, or Euribor — remained near a record low of 1.48 percent after the European Central Bank trimmed interest rates by a quarter point to 1.25 percent. Although the ECB's rate cut was smaller than most analysts were expecting, its president Jean-Claude Trichet told reporters at a press conference that the bank may reduce its benchmark rate again and that it would discuss alternative measures to help the economy. These may include buying assets from banks to boost the amount of money in the financial system. Both the dollar and the euro rates have fallen all week, as a robust rally in stock markets helped confidence in the banking sector. Interbank lending rates affect the wider economy by determining the costs of loans to households and businesses. They had spiked higher since the start of the financial crisis, and have only been falling gradually as governments and central banks around the world announced a raft of measures to stimulate the global economy and financial sector.