P.M. BRIEFING : Trend-Setting St. Louis Bank Reduces Prime Rate to 10%

Southwest Bank of St. Louis, often a bellwether on interest rate trends, said today it is lowering its prime lending rate to 10% from 10.5%, effective Thursday.

No major banks immediately followed Southwest’s lead. Spokesmen for Citibank, Chase Manhattan and Morgan Guaranty, all of New York, and San Francisco-based Bank of America said they had no immediate announcements due on their prime rates.

If the prime rate cut is followed by other major banks, it would be the first reduction in the prime since July when banks lowered it to 10.5% from 11%.

The prime is traditionally the rate a bank charges its best customers but is more commonly used now as a peg for consumer rates.

The move follows signs that the Federal Reserve is pushing down short-term interest rates. The Fed entered the money markets Monday and Tuesday, pushing down the closely watched federal funds rate to 8.5% from the 8.75% level seen as its previous target. The fed funds rate is the rate banks charge one another for overnight loans.