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Credit Markets Tighter Despite Citigroup Rescue

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LONDON — Dollar lending rates between banks rose Monday despite the announcement of a U.S. plan to rescue troubled lender Citigroup Inc.

The rate on three-month loans in dollars _ known as the London Interbank Offered Rate, or Libor _ rose slightly to 2.17 percent from 2.16 percent Friday.

The increase in the rate _ which is important both for the financial sector and the wider economy, as it determines the cost of loans to households and businesses _ suggests banks are worried that other financial institutions may collapse.

This fear was not relieved by news the U.S. Treasury will inject $20 billion in cash into Citigroup and take on hundreds of billions of dollars of risky assets. While the measure helped stock markets rise, it did not ease credit markets in the U.S.

The rate for three-month loans in euros _ known as the European Interbank Offered Rate, or Euribor _ did manage to decrease somewhat, to 3.97 percent on Monday from 4.02 percent Friday.

But both the U.S. and the European rates remain significantly above their benchmarks set by central banks _ 1 percent in the U.S. and 3.25 percent in the 15-nation euro zone.

Policy makers consider reducing them to be a key task to contain the financial crisis.