Sept 16 (Reuters) - Top U.S. banks raised their prime lending rate on Wednesday after the Federal Reserve increased its benchmark interest rate, a move that is set to raise borrowing costs for consumers and businesses.
JPMorgan (JPM.N), KeyCorp (KEY.N), and BNY (BNY.N), raised their prime lending rate to 7% from 6.75%, effective Thursday, following the Fed's first interest rate hike since 2023.
The Fed raised interest rates by a quarter of a percentage point on Wednesday as policymakers focus on addressing persistent inflation.
The prime rate, which typically follows the federal funds rate, is used by U.S. banks as a reference for setting rates on many financial products such as credit cards and personal loans.
Rate hikes typically boost bank earnings as they earn more net interest income — the difference between what banks earn on loans and pay out on deposits. Banks are largely asset-sensitive businesses — loan yields reprice faster than deposit costs.
A tightening cycle, however, can slow parts of the economy, squeeze loan demand and impact credit quality as clients navigate higher borrowing costs.
Top banking executives who gathered at an industry conference in New York this week struck an upbeat tone on the U.S. economy, saying the overall backdrop remains constructive as clients stay resilient.
Reporting by Arasu Kannagi Basil in Bengaluru; Editing by Shilpi Majumdar
