Many major banks reduced their prime lending rates by a quarter point, to 8.25%, in response to the Federal Reserve's decision Tuesday to cut its target for the federal funds rate to 5.25% from 5.5%.

Norwest Corp., Minneapolis, led the way among large banks, announcing its reduction Tuesday. It was followed Wednesday by a host of others, including Chase Manhattan, BankAmerica, First Chicago NBD, First Union, Comerica, Wachovia, Bankers Trust, TCF Financial, BankBoston, and Harris Bank.

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