Further fall in U.S. rates

Press, 7 May 1980, Page 23

Further fall in U.S. rates

United States interest rates fell further on Monday as Morgan Guarantee Trust set a new prime rate of 17.5 per cent, the lowest among major United States banks. The drop in ratt-j reflected slackening demand for loans, and underlined the country’s move towards recession, market analysts said. , Morgan Guaranty, which has become a leader of the fall in rates, dropped its prime by a full one per cent, an unusually large step. Several minor banks followed its new rate of 17.5 per cent. Chase Manhattan also lowered it prime, the rate charged to banks’ best corporate customers, from 18.5 to 18 per cent. The prime rate has dropped steadily from a record level of 20 per cent in April, confounding some! analyse’ predictions that! interest levels might stabilise. United States rates were'

driven up rapidly in February and March by a stem credit -squeeze designed to combat inflation. But since then economic growth has abruptly slowed and some economists now see recession rather than inflation as the main threat to the country. The fall in United States rates pushed down the dollar. The currency was becoming considerably less attractive to international investor-s, analysts said. The lowest prime rate is now below the 18 per cent annual inflation rate which the

/i United States has recorded ij during the past three months. 1; The pound sterling rose to . j $2.2790, from $2.2545. International markets 1 reacted calmly to the death .•■of President Tito, although - some speculators bought j gold, pushing up the price. Dealers said the death of the s Yugoslav leader had long - been expected by investors, - and it did not significantly > affect international tension. 1 Gold later fell back to j $516 an ounce in Europe, r where trading was light be--1 cause British markets were : on holiday.