LIBOR rates fall

The Federal Open Market Committee’s decision to slash US rates down to 4.75 per cent has had an international knock on effect, with UK LIBOR rates falling to 5.89 per cent overnight.

Barry Naisbitt, chief economist at Abbey believes this will go a long way to help reduce the current turbulence.

He said: “Reducing policy interest rates by 0.50% clearly has given reassurance to equity markets. The action was judged by the Fed to be consistent with recent trends in inflation and its objective to promote sustainable economic growth. It should in turn help to support steady economic growth in the UK."

Over the past few weeks, longer term USD BBA LIBOR rates have been setting below the short-term rates, indicating that the market was expecting a cut in interest rates.

Sterling BBA LIBOR rates for Wednesday 19 September:

• Overnight: 5.8875
• Three-month: 6.55125
• Twelve-month: 6.28125

Euro BBA LIBOR:

• Overnight: 4.14625
• Three-month: 4.72438
• Twelve-month: 4.68625

USD BBA LIBOR:

• Overnight: 4.94375
• Three-month: 5.23750
• Twelve-month: 4.87750

Angela Knight CBE, chief executive of the British Bankers' Association, said: “Longer term Sterling BBA LIBOR rates have dropped relative to the shorter term rates, indicating that the UK market may now be expecting the Bank of England Monetary Policy Committee to follow the Fed in cutting rates.”