Interbank lending rates continue to edge lower

LONDON -- The cost of three-month dollar loans between banks fell modestly Thursday amid hopes financial markets have stabilized and that government and central bank efforts to unthaw credit markets are having an effect.

The British Bankers' Association said the rate on three-month loans in dollars -- known as the London Interbank Offered Rate, or Libor -- edged down by 0.01 percentage points to 1.13 percent.

The equivalent rate for three-month loans in euros -- known as the European Interbank Offered Rate, or Euribor -- dropped 0.01 percentage points to a record low of 1.43 percent, while the three-month pound rate decreased 0.01 points to 1.57 percent.

The pound rate was fixed before Thursday's monetary policy decision by the Bank of England, which kept rates unchanged, as expected. Analysts believe the bank will leave them at their record low of 0.5 percent in coming months as Britain struggles with a recession.

Interbank lending rates affect the wider economy by determining the costs of loans to households and businesses. They had spiked higher since the start of the financial crisis, and have only been falling gradually as governments an