Money-Market Rates in London Fall as Central Banks Inject Cash

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Source: Bloomberg

Money-market rates in London fell after central banks provided $254 billion of emergency cash to ease the paralysis in the credit markets and UBS AG got a $59 billion government bailout.

The London interbank offered rate, or Libor, that banks charge each other for three-month loans in dollars declined for a fourth day, sliding 5 basis points, or 0.05 percentage point, to 4.50 percent today, the British Bankers' Association said. The overnight rate fell 20 basis points to 1.94 percent, the lowest level since November 2004 though still 44 basis points above the Federal Reserve's target. Asian rates also dropped.

``Lending rates between banks are generally coming down, albeit slowly,'' said Su-Lin Ong, a senior economist at RBC Capital Markets Ltd. in Sydney. ``The system's been through incredible stress in the last month, so it's not going to snap in overnight.''

While the declines signal the $3 trillion earmarked by governments to tackle a collapse in trust between banks may be working, investors remain skeptical that the measures will stave off a global recession.

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