The rates banks charge each other to borrow US dollars mostly fell on Thursday, with the benchmark rate setting its fourth consecutive record low on expectations major central banks will keep interest rates low well into next year. The Organisation for Economic Co-operation and Development underscored that view, saying in a report the world's key central banks will not need to start raising policy interest rates until late 2010 because of low inflation and economic slack.
"We're coming to the end of the unconventional policy road for the United States and the UK, but that doesn't necessarily mean that is the segue into policy normalisation. We're moving to a rates 'lower for longer' view," said Richard McGuire, strategist at RBC Capital Markets.
The three-month dollar Libor was fixed at a record low 0.26656 percent, while the equivalent euro rate edged up a touch but held near its all-time low of 0.66938 percent set in October. The sterling rate was unchanged for a second day at 0.61250 percent.
The premiums these interbank rates trade over a risk-free benchmark, the overnight index swap rate, a gauge of market stress, stayed well within the recent ranges, having returned close to levels seen before the credit crisis erupted in mid-to-late 2007.
In the US, three-month borrowing rates for US banks fell to a record low of 0.2763 percent on Thursday from the previous session's 0.2789 percent, according to ICAP's New York Funding Rate. ICAP's one-month NYFR also fell to a record low of 0.2262 percent versus the previous session's 0.2367 percent. Bank of England Monetary Policy Committee member Paul Fisher continued the dovish tone seen in the central bank's November minutes, saying the bank was keeping all options open on the scale of its quantitative easing programme.