KEY Eurozone bank-to-bank lending rates hit new 21-month lows yesterday, dragged down by the enormous volume of cash the European Central Bank (ECB) has pumped into financial markets since late last year.
The three-month euro interbank offered rate (Euribor), an estimate of lenders’ borrowing costs, dropped by six basis points to 0.7 per cent – the lowest level since June 2010.
The ECB, which left official Eurozone interest rates at one per cent last week, has poured over €1 trillion of ultra-cheap, three-year funding into the banking system since the end of December, a move which has sparked a 45 per cent drop in the prices at which banks lend to each other.
With the ECB expected to keep limit-free liquidity available and interest rates at their record low for the foreseeable future, further falls in Euribor rates are expected.
City A.M. Reporter