The rate at which banks lend to each other fell to 6.514% from 6.627%, it was an immediate effect of surprise move by the Bank of England, the US Fed and Bank of Canada, ECB and Swiss central bank to inject cash into money market. In case of, a rate Libor, remained high this could lead to slower economic growth. Some analysts considered that the decline was not significant and may not point to a long-term change in rates. Banks have become nervous about lending money because of heavy losses linked to problems in the US mortgage market, and have increased the Libor rate as a result.
Five central banks announced on Wednesday that they would make $110bn available in loans to ease concerns about banking sector losses and add liquidity to money markets. The promise of extra cash was needed because the interbank rate had remained stubbornly highly despite an interest rate cut in the UK. The rate at which sterling is lent over three months was not the only one to be lowered. The three month dollar rate fell to 4.99% from 5.0575%, while the rate for euros dropped to 4.9494% from 4.9525%. US shares dropped slightly in early trade on Thursday after wholesale prices increased by 3.2% in November, the biggest rise in 34 years, fuelling wider inflation concerns.