Isle banks cut
interest rates

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Star-Bulletin

Hawaii's largest commercial banks said yesterday they would lower prime lending rates by one-half point in response to the Federal Reserve's interest rate cut.

Bank of Hawaii, American Savings Bank and First Hawaiian Bank cut their prime lending rates to 4.25 percent from 4.75. The prime is the benchmark for millions of consumer and business loans.

The rate cut by Bank of Hawaii and First Hawaiian Bank were effective yesterday while American Savings Bank's rate reduction was effective today.

The Fed cut a half-percentage point to the federal funds rate, the Fed's main lever for influencing the economy. That pushed the funds rate, the interest that banks charge each other on overnight loans, to a 41-year low of 1.25 percent.

By lowering short-term interest rates, Fed policy-makers hope to motivate anxious consumers to spend more and wary businesses to invest more, energizing economic growth.