rate by 0.25 percent to six percent.

This represents the benchmark for pricing Bank of Bermuda demand loans and overdrafts in Bermuda dollars.

The interest rate on Bank of Bermuda BMD and USD statement and passbook savings accounts will also rise by 0.25 percent.

All rate changes will be effective from this Monday.

The Bank's retail clients senior vice president Danny Fox said the increase was in response to the rise in short term US interest rates after the Federal Reserve Board decided on Thursday to increase the cost of federal funds.

"With the need for residents to have the flexibility to transact in either Bermuda or US dollars, we find it necessary to closely align our local rates to those prevailing in the United States,'' he said.

"In fact, most of our deposit products move directly with market rates and have already benefited from market rate increases.

"We also want our savings customers to benefit immediately from this rise in rates.'' The bank's savings and loan customers will receive confirmation of the increase in rates on their next account statement.

Customers with questions should contact the bank for more information.