US Banks Raise Prime Rates to 7% Following Fed Rate Hike

The Federal Reserve (Fed) has raised its benchmark interest rate for the first time in three years and two months, leading major US banks to increase their prime rates. The Fed's decision on September 16 was followed by a 0.25 percentage point hike in prime rates at JPMorgan Chase, Bank of America, Citigroup, Wells Fargo, KeyCorp, Huntington Bancshares, Fifth Third Bancorp, and Truist Financial Corporation.

The new prime rate of 7% will apply to variable-rate products such as credit cards and personal loans. This move also puts upward pressure on fixed rates for mortgage loan products, increasing the overall cost of purchasing a dwelling or taking out a loan.

Large bank stocks fell in response to the Fed's decision, despite typically benefiting from benchmark rate hikes due to faster reset lending rates compared to deposit rates. Concerns about prolonged tightening appeared to outweigh these benefits.