A key barometer of what banks charge each other to borrow dollars for three months rose for a 13th week as traders expect the US Federal Reserve to raise short-term lending rates next month. The London interbank offered rate (LIBOR) to borrow three-month dollars climbed 0.45 basis points to 2.64450 percent, the highest level in a decade. For the week, it gained 2.6 basis points.
During this 13-week stretch of increases, three-month LIBOR has risen about 33 basis points. In addition to expectations of further Fed rate increases, three-month LIBOR has climbed on rising US government borrowing and a shrinking Federal Reserve balance sheet.
LIBOR is the benchmark rate for $200 trillion of dollar-denominated financial products, mainly interest rate swaps and floating-rate loans. Fed policymakers are expected to raise the target range on key lending rates at 2.25-2.50 percent at a two-day meeting on Dec. 18-19, marking their fourth rate increase in 2018.
The "effective" or average rate on federal funds, what banks charge each other to borrow excess reserves overnight, remained at 2.20 percent for a third day on Thursday, New York Federal Reserve data showed on Friday.
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