Jan 8 (Reuters) - A key gauge of interbank interest rates declined on Tuesday, recording its steepest single-day drop in nearly five months, as major banks expect short-term borrowing costs to fall as a result of market volatility and data pointing to a global growth slowdown.
The London interbank offered rate (LIBOR) to borrow dollars for three months fell to 2.78250 percent, down 1.4 basis points from the day before, which was the biggest decline since Aug. 10.
LIBOR is the benchmark rate for $200 trillion of dollar-denominated financial products, mainly interest rate swaps and floating-rate loans.
LIBOR reached its highest level in more than decade in December, propelled by rate increases from U.S. Federal Reserve, rising U.S. government borrowing and a shrinking Fed balance sheet.
LIBOR has fallen on expectations the Fed might slow its rate hikes, or even stop raising rates in 2019, analysts said.
Reporting by Richard Leong Editing by Paul Simao