The cost of borrowing money in bank-to-bank transactions continued to improve this week, signaling an easing of the credit crunch in the credit market. Many challenges remain, however, for the global credit economy. Analysts indicate that the credit market is loosening up a bit and banks are starting to lend more and more money.

Recently, due to the turbulence in the US economy specifically the housing, financial, and banking sectors, theres has been a severe lack of confidence in the economy. This led to a tightening of the credit market, with banks less and less willing to loan money to each other. This bank-to-bank lending, however, is vital to the operations of the credit, financial, and banking sectors in how they conduct a variety of transactions. As the Fed has continued to combat these trends by lowering the rates of and restrictions on such lending practices, the credit market has been loosening up a bit. Experts cautioned, however, that we still have a long ways to go until the crisis is over.

The question looming at present: is this recession going to be a long and tough one or a less severe one?

In London, the British government has worked hard to combating the global recession and credit crunch, lowering the key lending interest rate for bank-to-bank transactions to around 1.2%. Compare that to the astronomical US rate of 6.88% from just earlier this month when everything was going awry. The US economic bailout package was signed into law recently to help out.

Around the world, the LIBOR average (an indicator of the rate charged by banks in bank-to-bank lending transactions) continued to drop, signaling a global effort to combat the ongoing recession. Still, many investors and financial analysts remain pessimistic about the health of the global economy. Market measures indicate that there is a widespread sentiment about staying away from riskier investments in the short-term.

The US government debt has continued to rise as stock prices have declined yet again. The 30-year bond prices are rising and the yield declined, signaling investors seeking a safer haven of government bonds in terms of declining and uncertain stock prices.

The US Fed has indicated its latest fight against the ongoing recession by raising the interest rate it pays to commercial banks on reserve holdings. This encourages banks to store more of their excess capital and cash with the Fed so that the Fed bankers have more control over the flow of money in the nation. It also allows the policy makers to maneuver more rate changes in the future to stimulate the economy.

Positive signs and positive work is being done in the credit market, but we’re not out of the woods just yet.