UK cut does little to alleviate interbank tension

Sterling interbank borrowing costs fell only slightly in response to the Bank of England's 25 basis point rate cut on Thursday, indicating that the cut did little to alleviate liquidity tensions.

The London interbank offered rate (Libor) for sterling, which measures the average cost of interbank borrowing, for three month loans fell by just three basis points from 6.64% to 6.61%, meaning the spread between bank rate and interbank costs widened by 22 basis points.

The overnight sterling Libor

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