Analysts Fear Economic Recovery Could Stall: Several Banks Raise Prime Rate to 12 1/2%
Several of the nationÛªs largest banks yesterday raised their prime rates to 121/> percent from 12 V\ percent, continuing a new upsurge in interest rates that some analysts fear eventually could stall any economic recovery.</br></br>The rise came as new figures from the Federal Reserve Board showed the nationÛªs basic money supply climbed by $1.1 billion in the week ended Sept. 10ÛÓa move likely to maintain pressure for interest rates to rise still higher.</br></br>Meanwhile, in a reflection of the recent jump in home mortgage rates, the government announced yesterday it is raising the maximum interest rate for FHA and VA mortgages to 13 percent, from 12 percent previously.</br></br>At the same time, the FedÛªs policymaking Open Market Committee disclosed it voted Aug. 12 to lower its third-quarter targets for the basic monetary aggregates in a further effort</br></br>Separately, the Commerce Department reported yesterday that the output of the nationÛªs economy plunged more rapidly during the April-June quarter than it previously had thought, while the inflation rate was slightly higher.