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Banks increase prime rates after Fed announcement

M&T Bank announced on Wednesday that it would increase its prime lending rate to 4 percent from 3.75 percent.

It was the first major bank to announce a change to the base rate for consumer loans, which has been at 3.75 percent during most recent weekly surveys.

BB&T and Citibank followed suit, both also increasing their prime rates to 4 percent from 3.75 percent. BB&T's changes are effective immediately, while Citibank said its changes will take effect starting Thursday.

For the second time in three months, the Federal Reserve increased its benchmark interest rate a quarter point amid rising confidence that the economy is poised for more robust growth.

The prime rate is the rate at which banks lend to their most creditworthy customers, and can be used as a benchmark for other loans such as those for small businesses or credit cards.

Though the Fed doesn't set the prime rate, changes in the rates set by the central bank tend to be closely correlated to the prime rate set by individual banks.

—CNBC's Jeff Cox and Anita Balakrishnan contributed to this report.

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