U.S. prime rates rise to 19%

Press, 6 May 1981, Page 29

U.S. prime rates rise to 19%

PA New York Four major United States banks raised their prime lending rate to businesses to 19 per cent yesterday, the highest for two months, as the dollar surged ahead, on 'foreign exchange markets, Morgan Guaranty, Citibank, Continental Illinois, and Harris Trust announced that they would increase the rate immediately from 18 per cent, so that it now stands only 2¥z points below the record 21¥z per cent level set last December. Earlier, Investors put pressure on the mark and the franc as they scrambled to buy dollars, anticipating interest rate. increases after last. Friday’s news of hlgher-than-expected United States money supply figures. Before the prime rate went up, the dollar opened in trading in Paris at its highest level for more than seven years, and dealers said that there was large-scale selling of dollars by the West German Bundesbank to shore 'up the mark. In Zurich, the dollar closed at 2.0405 francs, below the

day’s high of around 2.05 francs but sharply higher than last Thursday’s close of 2.0185 francs, dealers said. In Frankfurt, the dollar closed at 2.2385 marks, compared with its day’s high of 2,2455 marks, and in New York the dollar, compared with its Friday close, opened sharply higher at 2.2415 marks. Dealers in Zurich said that the market had anticipated the United States prime rate increases, but that they would still serve to strengthen the dollar. As a- further pointer to continuing tight credit in the United States, Chemical Bank yesterday became the second bank since Friday to raise its broker loan rate by two points to 20¥a per cent. In Washington, the chairman of the Federal Reserve Board (Mr Volcker) told reporters that he believed the board would continue efforts at aggressive short-term control over the United States money supply, despite a recent study suggesting that this strategy would help to keep interest rates volatile.