Prime Rate Cut 1/4 Point to 12 3/4% By Major Banks --- Fed Move to Relax Policy Believed to Be Confirmed; Money Supply Declines
NEW YORK -- Most of the nation's major banks lowered their prime lending rate on corporate loans to 12 3/4% from 13% yesterday, the first broad-based decline in more than a year and a half.</br></br>The move to a 12 3/4% base rate was initiated last Friday by Morgan Guaranty Trust Co. of New York. Other major banks held fast at the 13% level until Wednesday, when Wells Fargo Bank, San Francisco, cut its prime rate by a half point to 12 1/2%.</br></br>The prime rate decrease came as bankers and investors became convinced that the Federal Reserve System has eased credit conditions. Fed officials won't comment on current policy, but economists say that banking figures released yesterday confirm the central bank has adopted a more relaxed credit stance.</br></br>The Fed figures also showed that the nation's money supply fell $3.4 billion in the week ended Sept. 17. The drop, which was larger than generally expected, left the basic money measure, known as M1, close to the middle of the Fed's target range, which calls for 4% to 8% growth this year.</br></br>Bond prices surged for the second consecutive day. Although the rally lost some of its steam late in the day, some bellwether U.S. Treasury issues wound up the session with gains of nearly a point, or $10 for each $1,000 face amount.