MONEY MARKETS-Libor hits new lows ahead of c.bankers meeting

*Benchmark lending rates mark record lows

*Focus on exit plans as Jackson Hole meeting looms

*Interbank activity still sticky, BoE's next move debated (Updates with U.S. developments, adds NEW YORK dateline)

By John Parry and Kirsten Donovan

NEW YORK/LONDON, Aug 14 (Reuters) - The interbank cost of borrowing dollars, euros and sterling hit record lows on Friday as the market mulled mixed messages from major central banks and pondered how exit strategies for emergency liquidity measures will work.

The market's focus is turning to how governments will slowly withdraw the raft of extraordinary measures put in place to shore up the banking system and reinvigorate the economy. Comments from central bank governors at an annual gathering the Federal Reserve hosts next week at Jackson Hole, Wyoming, will be closely monitored.

"Central bankers are likely to discuss both the timing of their respective exit strategies and ways to implement them with minimal market impact," said Tony Crescenzi, strategist and portfolio manager with Pacific Investment Management Co. (PIMCO) in Newport Beach, California.

As the global credit crisis crosses the two-year mark, there are signs central banks are slowly withdrawing support for securities markets.

This week, the U.S. central bank signaled it aims to phase out by the end of October an emergency measure of buying $300 billion in longer-term Treasuries, as the economy shows signs of leveling off.

So far, debt markets appear to have responded positively to the Fed's advance warning about this timetable to retreat from the government bond market, said Kenneth Kim, economist with Stone & McCarthy Research Associates, in Princeton, New Jersey.

However, among the many other central bank emergency liquidity measures, "it is hard to know exactly at what point in time to pull out; which program to start winding down," Kim added.

The governor of the Bank of England -- which last week expanded its quantitative easing program -- suggested it could make it less attractive for banks to hold deposits with it in order to get them to circulate money.

"The time for fantastic cooperation is fading as the crisis abates ... the central banks all have their own individual problems and the focus is likely to be domestic first and foremost," said Calyon rate strategist David Keeble.

Traders said despite sharp falls in Libor interbank lending rates, market activity remained in the doldrums, with only certain names able to borrow and rates at which deals were done bearing little resemblance to the official rates.

Three-month dollar Libor rates USD3MFSR= fell about a basis point to a record low of 0.42938 percent after the Fed this week said rates would likely remain near zero for an extended period.

If credit market conditions were to deteriorate in coming months, central banks would likely open the emergency liquidity taps again, some expect.

"The risk of a setback in the money market has been significantly reduced by both the liquidity placed in the global financial system by the world's central banks and by the expectation that in the event of a setback, central banks would respond accordingly," Crescenzi said.

BoE Governor Mervyn King stopped short this week of openly calling on banks to start lending more, a key reason for the BoE's decision to pump money into the economy, including upping its asset purchase plan by 50 billion pounds to 175 billion.

Three-month sterling Libor rates GBP3MFSR= shed a basis point to 0.76875 percent [ID:nLE405239].

The so-called "Ted Spread" or gap of three-month interbank borrowing rates over relatively risk-free Treasury bills -- a gauge of stress in short-term lending markets -- narrowed to about 25 basis points on Friday, near the narrowest since March 2007.

One incentive for the Fed to hold rates down and keep hefty liquidity injections going for longer is the risk that a second wave of real estate collapses, this time in commercial property, could topple many medium-sized and smaller U.S. banks, analysts warn.

"The credit markets have improved but they are still stressed," said Kim. "Market participants are concerned about another shoe to drop, which is the commercial real estate market."

In Europe, the European Central Bank must decide how to handle its next tender of 1-year funds in September after the region's two largest economies this week posted a surprise rise in second-quarter growth.

The ECB has pledged to provide banks with as much money as they want for now and so must weigh whether to charge banks more than the 1 percent it has been in its recent money market operations. (Reporting by John Parry and Kirsten Donovan; Editing by Dan Grebler)