The Federal Reserve's aggressive move to boost short-term interest rates could spur, rather than inhibit, demand for business loans, according to some bankers and economists.

Even those who said loan demand is likely to be curtailed by the Fed's action expect the impact on business lending will be fairly insignificant.

Joseph May, executive vice president of Whitney National Bank in New Orleans, La., said uncertainty about the course of interest rates inhibited many of his customers from making business decisions that could have resulted in increased loan demand.

Tuesday's decisive action by the Fed eases that uncertainty, at least for the time being, Mr. May said. "As a result, we'll probably see some more normal investing and borrowing, which is a roundabout way of saying there might be an improvement in loan demand," added Mr. May, who is the outgoing president of Robert Morris Associates, a trade group for commercial lenders based in Philadelphia.

On Tuesday, the Fed boosted the key federal funds rate by another half of a percentage point, to 4.75%, and banks immediately followed with a half-point increase in the prime rate to 7.75%, affecting consumers and small to medium-size business borrowers.

In raising short-term rates by half a point, instead of a more modest quarter-point increase, the Fed also signaled that there would be no further credit-tightening moves on the part of the central bank for the time being.

After several years of steady sharp declines, business lending has taken off this year amid continued growth in the economy. That growth in lending came in the face of a series of credit tightenings by the Fed, beginning in February,

"I don't see where even a move to 7.75% on the prime is going to price many businesses out of the market," said Irwin Kellner, chief economist at Chemical Bank in New York.

"We found at Chemical Bank that loan demand really didn't begin picking up until the Fed began raising interest rates. That doesn't necessarily imply a correlation, but it does suggest that if businesses have a good use for money, rising interest rates are not going to deter them from borrowing."

Gary Ciminero, chief economist at Fleet Financial Group in Providence, R.I., said the latest round of rate increases will have a "small impact on business loan demand and a somewhat larger impact on consumer loan demand." Changes in the prime affect a variety of consumer loans, including equity loans, adjustable rate mortgages and some credit card rates.

At West One Bank in Boise, Idaho, Thomas Ripke, executive vice president and chief credit administrator, said it would be "naive" to think that the rate hikes won't put some crimp in business loan demand. But he added that interest rates still remain relatively low. But Dorothy Horvath, executive vice president of National City Bank in Columbus, Ohio, took a different view of the matter. Like Mr. Ripke, she is also an RMA officer.

"Our business loan demand has been very, very strong, and I don't see this latest rate hike modifying or reducing that at all," she said.

Indeed, in moving aggressively on the rate front Tuesday, Ms. Horvath said the Fed has demonstrated that it is serious about controlling inflation, "which is very good for the business environment."

And despite the string of prime-rate increases that have followed the Fed's credit-tightening moves, the overall rates charged on business loans are, if anything, lower than they were a year ago, she said.

That's because competitive pressures have forced banks to cut the amount they charge above their base lending rates.

"Generally, we're seeing a lot of margin compression, so that spreads are less than they were a year ago," Ms. Horvath said, adding, "I'm hearing that from all over the country."

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