	analysts see slow move to higher u s prime rate quarter point prime rate increases to pct by citibank and chase manhattan bank today will be followed by other banks only after they see clearer signs of the federal reserve s policy intentions economists said based on the spread between banks cost of funds and the prime rate it probably makes sense for others to follow but no rush is likely said paul mcculley of e f hutton and co citibank s surprise base rate increase quickly followed by chase sent u s bond prices lower and the dollar higher mcculley said that once the spread between three month certificates of deposit and the prime rate narrows to less than percentage points there is a strong chance of a prime rate increase it has been under points recently however banks are likely to hold rate increases until they see what the fed intends to do about  rates in the near term analysts said they noted that banks historically like to follow fed rate movements rather than lead them for example the last prime rate increase occurred in june when banks lifted the rate to pct from pct after a fed discount rate increase in april of that year major banks had been posting a pct prime rate since last august when they lowered the rate from eight pct shortly after the fed s half point discount rate cut to the current pct level on august the banks will not rush to raise their prime rates there should be a split prime for a while with some posting a pct rate and others pct said david jones of aubrey g lanston and co jones said the federal open market committee at today s meeting voted no change in fed policy but he said the fed may well foster higher  rates soon jones said that while the fomc probably voted no policy change today it may have decided to apply slight upward rate pressure later if the dollar weakens inflation pressures heat up or the economy shows sign of strong recovery the fed clearly indicated that they did not intend to tighten policy when they did today s coupon pass said joseph liro of s g warburg and co in a move that came a day earlier than most expected the fed today supplied permanent reserves to the banking system by offering to buy all maturities of treasury notes and bonds for its own account this seasonal reserve add is called a pass the fed demonstrated that there has been no policy change said elizabeth reiners economist at dean witter reynolds inc she said the spread between banks cost of funds and the prime rate is now around basis points compared with a basis point average in reiners said the spread is not really narrow enough to present a clear need for a prime rate increase the dean witter economist said that today s prime rate rise may have been less a response to  rates than an attempt to enhance the balance sheet bottom line reiners said that given recent problems with loans to developing countries large money center banks with heavy exposures might be the first to match the higher prime rate in an effort to get more profitable spreads on other loans the federal funds rate at which banks lend overnight money to one another could help determine how many banks match the higher prime rate and also how quickly they move in raising their prime rates banks cited a higher cost of funds in the three business days through monday the federal funds rate at which banks lend to one another averaged nearly pct but quarter end pressures helped push up funds the fed funds rate was extremely volatile today reflecting demand pressure associated with the end of the quarter and the close of the japanese fiscal year funds traded between five and pct once the special distortions end analysts said the funds rate probably will return to its recent trading level in the pct area they said that if it stabilizes near there banks may not quickly boost their prime rates but a consistently higher funds rates would suggest to many that the fed was fostering somewhat higher  rates to help the dollar then banks would lift prime rates quickly reuter 
