News that US interest rates were being raised yesterday may not be followed by a rise in local rates, but US dollar rates will be impacted.

Although Bermuda banks each make individual decisions on when to raise or lower rates, movement often mirrors what happens with interest rates in the US.

Yesterday US Federal Reserve Chairman Alan Greenspan announced that the Federal Open Market Committee?s statement had decided to raise short term interest rates by 25 basis points to 1.75 percent.

The Island?s oldest bank, Butterfield Bank, yesterday moved quickly to assure customers that it would only follow the Federal Reserve?s lead for its US dollar interest rates.

CFO Richard Ferrett said: ?We?re pleased to let our personal and commercial customers know that Butterfield Bank will not be changing its Bermuda dollar base rate in response to the decision by the US Federal Reserve?s Open Market Committee today to increase short-term interest rates by an additional quarter of a percent.

?This means that the Bank?s Bermuda Dollar lending rates will remain the same. Our decision reflects our continued commitment to offer highly competitive and innovative Bermuda Dollar residential mortgage and other lending services to the Bermuda Community Banking market.

But he cautioned: ?The Fed?s changes directly impact our US Dollar interest rates, which will change in line with the Fed?s increase. Consequently, the Butterfield US dollar prime rate will rise to 4.75 percent and the

Bank?s US$ Strata rate will rise to 1.375 percent for deposits of US$100,000 and over, effective today.?

Meanwhile, the Federal Open Market Committee said in a statement: ?The committee believes that, even after this action, the stance of monetary policy remains accommodative and, coupled with robust underlying growth in productivity, is providing ongoing support to economic activity. After moderating earlier this year partly in response to the substantial rise in energy prices, output growth appears to have regained some traction, and labour market conditions have improved modestly. Despite the rise in energy prices, inflation and inflation expectations have eased in recent months.?

The Bank of Bermuda could not be reached for comment last night.

Fed raises rate ? Page 26