Is there any significance to the fact that a short-term interest rate has nearly tripled in the last year, to 0.86 percent from 0.32 percent? The short answer, of course, is yes. But the more interesting answer involves what the change in the so-called three-month London Interbank Offered Rate, or Libor, says about the Federal Reserve’s new regulatory framework for Wall Street, which it has slowly but surely been rolling out since the worst days of the financial crisis eight years ago.
Libor is used to set the cost of money borrowed around the world. If you have an adjustable-rate mortgage or a credit card, the annual percentage rate is probably based on Libor. If your company has borrowed money from a bank, the cost of the loan is probably based on Libor. It is also the rate used to determine what big banks charge each other when borrowing money on a short-term basis.
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