Wells Fargo was the first of a slew of banks in announcing Wednesday that it would increase its prime rate to 3.5 percent effective Thursday.
It was the first major bank to announce a change to the base rate for consumer loans, which has been at 3.25 percent since 2008, according to the Federal Reserve's weekly surveys of the 25 largest banks. Wells Fargo was joined in raising the prime rate by other major banks such as Deutsche Bank, Citibank, U.S. Bancorp, JPMorgan Chase, HSBC, KeyCorp, M&T, BMO Harris Bank, SunTrust, Huntington Bancshares and PNC.
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The prime rate is the rate at which individual banks lend to their most creditworthy customers, including large corporations. It is often used as a benchmark for other loans like credit card and small-business loans.
The Fed has no direct influence on the prime rate, but it tends to be closely correlated to changes in the target federal funds rate, set by the central bank, which has been unchanged since 2008.