Libor drop could signal credit freeze thaw

In a sign that the global credit freeze may be thawing slightly, the London Interbank Offered Rate yesterday for three month loans — the interest rate that banks charge to borrow from one another — sank by 0.01%, its lowest level since September.

Three-month dollar Libor rates fell to 1.45%, marking its lowest level since the immediate aftermath of the collapse of New York-based Lehman Brothers Holdings Inc. in mid-September.

This drop came on the heels of decisions by the U.S Federal Reserve and central banks across Europe to slash interest rates and pump liquidity into the global markets.

However, one-week Libor rate increased slightly, by 0.8%, to 0.45%, according to published reports.

Fed Joins European Banks to Battle Credit Crisis

Banks Toughen Terms on Loans

Libor borrowing rate falls to 1997 level

Treasury invests in several regional banks

Euro central bank leaves rates unchanged