LIBOR is an acronym that stands for to the London Interbank Offered Rate. The term interbank refers to the fact that the rate is a rate used for banks and financial institutions similar to the U.S. fed funds rate. It is the rate of interest charged on short-term loans made between banks. LIBOR is published by The British Bankers Association and is used as the benchmark for banks rates all over the world.

The LIBOR is one of the most widely used broad market measures for short-term interest rates. The interest rate on LIBOR depends on the availability of money in the European market. LIBOR has become more than just a money market interest rate that is a standard in the interbank Eurodollar market. LIBOR applies not only to the European market and European currencies, but also to other major currencies such as the US Dollar. Even though the LIBOR rate is the rate at which banks borrow and lend money in the interbank market to manage liquidity and meet money supplies needed in foreign markets, since world markets have become more intertwined it can have a measurable impact on U.S. interest rates as well. LIBOR interest rates are commonly used as an index to determine interest rates on adjustable rate mortgages and business loans in the United States.

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