Most major banks quickly responded to the Federal Reserve's interest rate hike by raising their own prime lending rates to 8%.

The prime rate is traditionally the rate available to the banks' best customers and is still an important lending benchmark.

The Fed raised its target for the overnight Federal funds rate to 5%. For much of this decade, banks have maintained a 300 basis-point differential between the prime and the funds rate.

Among those announcing an 8% prime were Citibank, a unit of Citigroup Inc.; BankBoston Corp., Bank One Corp., National City Corp., KeyCorp, PNC Bank Corp., Mellon Bank Corp., U.S. Bancorp, First Union Corp., and Wells Fargo & Co.

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