Dollar Libor falls after Fed decision

LONDON (MarketWatch) — The London interbank offered rate, which banks charge each other for short-term loans, fell Wednesday — a day after the U.S. Federal Reserve dropped interest rates to historic lows. Three-month Libor fell to 1.58% — the lowest since July 2004 — from 1.85% on Tuesday. Libor spiked higher this fall as banks became reluctant to lend to each other in the wake of the collapse of Lehman Brothers. Before the credit crunch, three-month Libor typically traded within half a percentage point or so of the official Fed funds rate. The Fed on Wednesday dropped the rate to a target between zero and 0.25% from 1%.

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