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.

Last week two smaller banks anticipated the Fed's move. West Des Moines State Bank in Iowa shaved its prime to 8.25%, and St. Louis-based Southwest Bank of Missouri dropped its rate to 8%.

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