(Adds interest rate strategist quote)
Feb 7 (Reuters) - A key barometer of interbank borrowing costs recorded its biggest single-day fall on Thursday to its lowest level since late November amid bets that the U.S. Federal Reserve might lower interest rates.
The London interbank offered rate (LIBOR) to borrow dollars for three months fell about 4.1 basis points to 2.69700 percent, the lowest level since Nov. 23. This was the steepest decline since a 5.5-basis point fall on May 21, 2009.
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 at 2.82375 percent, propelled by rate increases by the Fed, rising U.S. government borrowing and a shrinking Fed balance sheet.
It has fallen by nearly 12.5 basis points since Dec. 20.
"In essence, it's not too much of a stretch to claim that not only are short-term borrowing costs not increasing, they've declined by half a hike since the December FOMC meeting," Jon Hill, interest rates strategist at BMO Capital Markets wrote in a research note.
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 Nick Zieminski and Jonathan Oatis)