Dec. 8 (Bloomberg) -- Money-market rates may be little changed as President-elect Barack Obama’s pledge to revive the U.S. economy with the largest spending package in 50 years failed to encourage banks to lend to one another for more than a day.

Three-month loans in dollars were at 2.19 percent as of 9:36 a.m. in London, said Jan Misch, a trader in Stuttgart at Landesbank Baden-Wuerttemberg, Germany’s biggest state-owned bank. That’s unchanged from the London interbank offered rate, or Libor, at the end of last week. The one-month rate was 1.86 percent, from 1.87 percent on Dec. 5, Misch said. Some Asia rates increased.

“There’s going to be a bit of inertia as we head toward year-end,” said Sean Maloney, a London-based fixed-income strategist for Nomura International Plc. “We’re not seeing major improvements on the numbers.”

Money markets, essential to keep finance flowing to businesses and consumers, froze after Lehman Brothers Holdings Inc. collapsed Sept. 15, spurring governments to bail out financial institutions and central banks to offer unlimited cash. Obama, appearing yesterday on NBC’s “Meet the Press,” repeated plans to make the biggest investments in the country’s infrastructure since President Dwight D. Eisenhower created the interstate highway system a half-century ago.

The Libor for overnight dollar loans will be between 0.1 percent and 0.3 percent, Misch said. It was about 0.3 percent at the end of last week.

Recession to Worsen

Obama also said the U.S. recession will worsen before a recovery takes hold and that his plan to boost the economy will be “equal to the task,” without worrying about a short-term widening of the budget deficit.

Libor, the benchmark for $360 trillion of financial products worldwide, is set by a panel of banks in a survey by the British Bankers’ Association before noon each day in London. The euro interbank offered rate, or Euribor, is published by the European Banking Federation earlier in the day.

The three-month Euribor dropped more than seven basis points to 3.49 percent today, the lowest level since Oct. 11, 2006, the EBF said.

Japanese banks’ borrowing costs rose for the 21st day, the longest run of gains since July 2006. The Tokyo three-month interbank offered rate, or Tibor, increased to 0.903 percent, the most since March 1998. Australian banks’ funding costs jumped to the highest since October, a measure of cash scarcity showed.

BIS Report

Money markets may remain frozen if financial institutions become reliant on central bank cash, deterring them from lending to each other, the Bank for International Settlements said.

“Interbank lending has not resumed, and money markets remain dysfunctional despite increased central bank intermediation and state guarantees,” Francois-Louis Michaud and Gert Schnabel, analysts at the Basel, Switzerland-based BIS, wrote in a report published today. “Increased central bank intermediation may in some cases weaken banks’ incentives to resume their intermediation function.”

Banks deposited 250.1 billion euros ($322.1 billion) with the ECB in its overnight facility, the central bank said today, underscoring the reluctance of financial institutions to lend. It was the 13th straight day the figure surpassed 200 billion euros. The daily average in the first eight months of the year was 427 million euros.

“The BIS has a point but what can you do?” David Keeble, head of fixed-income strategy at Calyon, the investment-banking unit of Credit Agricole SA, said in a Bloomberg Television interview. “You’re a central bank and your financial system isn’t working, you have to be the lender of last resort.”

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net

Last Updated: December 8, 2008 06:29 EST