MONEY MARKETS-Banks trim rates before European central bank move

(Repeats to add MONEY MARKETS tag in headline)

* Interbank rates fall, approaching 1-month anniversary

* Overnight sterling Libor lowest since Aug 2004

* European central banks pare rates; BoE cut by 150 bps

* Commercial paper supply rises after recent decline (Recasts, updates throughout; changes dateline; pvs SINGAPORE)

By Richard Leong

NEW YORK, Nov 6 (Reuters) - Banks trimmed the loan rates they charge each other on Thursday ahead of rate cuts from several European banks, led by Bank of England's whopping 1.50 percentage point move.

The decline in interbank rates is approaching a one-month anniversary as a massive government move to thaw the global credit freeze has taken hold.

Continued improvement in bank lending conditions was accompanied by revived activity in the U.S. commercial paper market, offering another option for companies to fund their daily operations, analysts said.

"This will help the inter-bank market, as will the reduced reliance that U.S. companies will have on bank credit lines as a result of the reopening of the CP market," said Tony Crescenzi, chief bond market strategist with Miller Tabak & Co in New York.

The most dramatic move in the closely watched unsecured lending market in London was in sterling, as traders had anticipated a half percentage point cut from the BoE.

The overnight interbank rate on sterling GBPONFSR= fell to 4.00000 percent, its lowest since August 2004, according to the British Bankers' Association's daily fixings on Thursday.

Euro and dollar Libor levels also fell. [ID:nL6479267]

After daily BBA fixings were set, the U.K. central bank surprised the market and slashed benchmark rates by 1.50 points, to 3.00 percent, the lowest since 1954. The size of the rate cut was the biggest since the recession in 1981.

The European Central Bank, Swiss National Bank and Denmark's central bank followed with half-point cuts.

The easing in policy rates has been among the numerous measures central banks have been using to unlock credit and avert a deep, protracted global recession.