Feb 8 (Reuters) - A key barometer of interbank borrowing costs edged up on Friday, stabilizing after the steepest decline in nearly a decade that was linked to expectations the U.S. Federal Reserve was unlikely to raise interest rates further.
The London interbank offered rate (LIBOR) to borrow dollars for three months increased 0.075 basis point to 2.69775 percent. On Thursday, it tumbled about 4.1 basis points, which was the steepest single-day drop since a 5.5 basis point fall on May 21, 2009.
On the week, three-month LIBOR fell 3.49 basis points, marking its weekly decrease since the week of Aug. 20, 2010 when it declined 4.02 basis points.
LIBOR is the benchmark rate for $200 trillion worth of dollar-denominated financial products, mainly interest rate swaps and floating-rate loans.
In December, LIBOR reached its highest in more than decade, propelled by rate increases by the Fed, rising U.S. government borrowing and a shrinking Fed balance sheet.
Last Wednesday, the Fed said it would be “patient” before ratcheting key lending rates higher. Fed Chairman Jerome Powell said the case for rate increases had “weakened” in recent weeks.
The U.S. central bank also signaled it was prepared to adjust the normalization of its balance sheet.
Reporting by Richard Leong Editing by Chizu Nomiyama