The Euribor - Euro Inter-Bank Offered Rate - interest rate which banks charge each other in the inter-bank market, hit its highest level in 2008 today. The rise in the 3-month rate is equivalent to almost 3 ECB interest rate hikes on the benchmark 4% rate.

Following the record liquidity provision of €348.6 billion by the European Central Bank - more than a half trillion dollars - in Dec 2007, the 3-month rate had fallen each trading day from Dec 18, 2007-Jan 23, 2008.

The 3-month rate rose to 4.135% after the ECB raised its benchmark rate to 4.0% in early June 2007. It was 4.949% on Dec 17, 2007.

In recent weeks, the Euribor rates have risen each trading day, reflecting a return to tighter money market conditions.

The Euribor three-month rate - a key rate used in commercial lending - increased 3 basis points to 4.7% (4.699%), the highest level since Dec. 27th and its 14th straight rise, the European Banking Federation said today. The one-week rate rose 4 basis points to 4.31% (4.315%), also the highest since Dec. 27th.

The rate of 4.7% is the equivalent of almost three additional ECB interest rate hikes over the benchmark rate of 4% and for the corporate sector coupled with the rise in the euro, it has a negative impact on economic activity.

Money-market rates, including Libor (London Inter-Bank Rate), which is used as a benchmark both in the US and Europe, have been rising as fears have intensified that some banks may fail and the recent meltdown of US investment bank Bear Stearns, fuels the concerns.

The European Central Bank provided an extra €14 billion in emergency funds to banks today.

Euribor Rates