LIBOR and variants

Interbank rates are quoted bid (to borrow) and offer (to lend). The London interbank offered rate (LIBOR) is a benchmark. The interest rates on many credit agreements worldwide are set in relation to it; for example, as LIBOR plus 0.5%. Most major financial centres have LIBOR equivalents, such as AIBOR, FIBOR and PIBOR in Amsterdam, Frankfurt and Paris.

There is no direct equivalent in the US. Its interbank market is the Federal funds market, while the base for loan contracts is the prime rate (the rate charged to borrowers with prime or excellent creditworthiness). However, whereas LIBOR changes constantly under the direct influence of supply and demand, the prime rate is set by the banks (with reference to market rates) and is changed less regularly.

Related topics:

Central bank discount rate

Intervention rate

The discount rate

Money market rates


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