The London Interbank Offered Rate for dollars has dropped to a record low, prompting the credit markets to loosen up.
Fort Worth, TX (WiredPRNews.com)—The credit market may be loosening up as the LIBOR, or London Interbank Offered Rate, for US currency has dropped to its lowest rate in four years.
According to an October 17, 2008 article by Keith Jenkins that appeared at the Wall Street Journal’s website, the three-month dollar rate that banks charge each other has been dropping which shows that confidence is returning to the credit markets. This drop in LIBOR rates makes it easier for banks to loan money to each other for short-term cash loans.
While the national average unemployment rate, according to the Bureau of Labor Statistics website, has held steady at 6.1%, the big-ticket purchases like cars have slowed in recent months.
According to an October 15, 2008 Associated Press article by Martin Crutsinger that appeared in Yahoo.com, automobile sales are down 3.8%. Similar declines have hit department stores, according to the Crutsinger article, with appliance sales dropping 1.5% and furniture sales dropping 2.3%.
However, with all the drops in consumer and commercial spending, the drop in the LIBOR is a significant signal that the economy is improving, as banks are much more willing to make short-term loans to each other. Another testament to the fundamental soundness of the economy is the fact that unemployment is quite low. The recent rise to 6.1% is a high, after several years of the national unemployment average of staying steady at 5%.