Money: The Lift of Lower Rates

For the second time in two weeks and the fourth time this year, U.S. banks lowered their prime rate. The minimum annual interest charge to the most creditworthy corporate customers dropped from 7½ to 7%. The reduction was made not because of a new surge in the money supply—indeed, the supply remained fairly flat in October and November—but because of a weakness in demand for loans. Although the normal growth of the economy would call for a $1 billion increase in bank lending during the summer and fall, bank loans have actually declined by $3.5 billion since June. "Business-loan...

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