| NEW YORK, Sept 19
NEW YORK, Sept 19 A gauge of what banks charge
each other to borrow dollars for three months rose on Monday to
a more than seven-year high ahead of the U.S. Federal Reserve's
two-day policy meeting.
The central bank is widely expected to hold short-term U.S.
interest rates in a target range of 0.25 percent to 0.50 percent
at its meeting, which begins on Tuesday, while it is likely to
leave the door open for a rate increase by year-end.
The London interbank offered rate on three-month dollars
, a benchmark for more than $300 trillion worth of
financial products worldwide, rose to 0.86067 percent from
0.85711 percent on Friday.
This is the highest level since 0.88313 percent on May 13,
Libor has risen 37 percent since late June as U.S. money
market funds have scaled back their holdings of short-term bank
debt in advance of new regulations. On Oct. 14, U.S. Securities
and Exchange Commission rules on share value and fees will take
effect, but government-only money funds will be exempt from
Since July, some U.S. prime money market funds, which had
been major holders of commercial paper and other bank debt, have
changed over to funds that hold only government securities.
Three-month Libor's premium to the three-month overnight
indexed rate, which measures traders' expectations
on bank borrowing costs in three months, has hovered near its
widest level since early 2012, according to Reuters data.
This spread was last at 0.421 percent, compared with 0.419
percent on Friday.
J.P. Morgan analysts on Monday forecast three-month Libor to
peak at 0.90 percent by the end of the third quarter and its
spread against the three-month overnight indexed rate to reach
Meanwhile, Libor for other maturities were higher from
One-month Libor rose to 0.53617 percent, which
was the highest since March 2009.
Six-month Libor increased to 1.25656 percent,
its highest since June 2009.
(Reporting by Richard Leong; Editing by Lisa Von Ahn)