Bank-to-bank lending rates fell on Friday as the benchmark euro rate had its biggest fall in seven weeks after global policymakers said they were in no hurry to exit unconventional stimulus measures. Three-month borrowing rates for US banks were 0.3350 percent on Friday versus the previous session's 0.3361 percent, according to ICAP's New York Funding Rate.
That compared with the three-month dollar-denominated London interbank offered rate last fixed at 0.31438 percent. British Finance Minister Alistair Darling warned against repeating mistakes of the 1930s by withdrawing stimulus too early, a move that could throw the world back into recession.
"We've made those mistakes before," said Darling at a meeting of Group of 20 developed and emerging nations in London. "Once recovery is established, that is the time to ensure that we gradually withdraw the extraordinary measures we have in place..."
ICAP's one-month NYFR was 0.2525 percent versus the previous session's 0.2517 percent, compared with a one-month dollar-denominated Libor rate last fixed at 0.25375 percent. The views from Europe were in line with those of the Federal Reserve. Minutes from the Fed's August 11-12 policy meeting released on Wednesday said it was "most likely" that Fed officials would hold benchmark rates at very low levels for an extended period of time.
The three-month euro London interbank offered rate (Libor) was fixed at a record low 0.76250 percent, down 1.5 basis points from Thursday, the biggest decline since July 17. The equivalent Euribor rate, traditionally the main gauge of interbank euro lending, was also set at an all-time low of 0.803 percent.
Both dollar and sterling benchmark Libor rates were also set at new lows of 0.31438 percent and 0.66500 percent respectively. The premium the three-month euro Libor rate trades over a risk-free benchmark rate, the Overnight Index Swap (OIS), was little changed at 40 basis points, having already fallen sharply from highs near 200 basis points seen in the aftermath of the collapse of Lehman Brothers a year ago.
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