Walter Wriston, chairman of Citibank, implied yesterday in a telegram to the chairman of the House Banking Committee that the bank again would increase its prime lending rate, perhaps as early as today.
The formula Citibank, the nation's second largest bank, uses each Friday to set its prime rate would call for an increase to 15 3/4 percent or 16 percent today, from the current 15 1/4 percent rate analysts said.
Earlier this week the committee chairman, Rep. Henry Reuss (D-Wis.), appealed to Wriston not to apply the formula, which ties the prime to market rates for large, 90-day certificates of deposit, this week because errors in money supply figures from the Federal Reserve had distorted those market rates.
Replied Wriston yesterday, "I can assure you that we will exercise our usual care in looking at all factors that affect the money market."
But he added, "The world is carefully watching to see whether or not political pressure on interest rates will force the Fed to abort its program of using the monetary aggregates as the primary tool of monetary policy and thus weaken our credibility in fighting inflation."
In other words, Wriston was warning Reuss that holding rates down through political pressure could undo both the Federal Reserve's new experiment in trying to control the expansion of credit and its intended anti-inflationary impact.
On Oct. 6 the Fed decided to stop pegging the key federal funds rate which it had issued as a guide in controlling changes in the money supply. Instead, the Fed is letting that rate -- which is charged by banks lending other banks money usually on an overnight basis -- vary over a wide range.Now the Fed is concentrating on direct control of the level of bank reserves, the portion of any deposit a bank must set aside as a precautionary measure.
Meanwhile, the Federal Reserve reported that the nation's money supply fell $1.3 billion, to $377.5 billion, in the week ended Oct. 24. The number for the previous week, as expected was revised downward by $700 million from the level reported a week ago. (Money supply tables are on D5.)
The revision in the money supply measure known as M-1 -- which includes currency in circulation and checking account deposits at commercial banks -- was revised because of the third weekly error in a row at Manufacturers Hanover Trust Co. in information submitted to the Fed.
The earlier and larger $3.7 billion in errors, which showed the money supply larger than it really was, were those referred to by Reuss. Money market specialists reacted to the high money supply numbers by pushing up interest rates in anticipation of Federal Reserve actions to tighten the credit reins further.
With the latest revisions, M-1 has grown over the last 13 weeks, as measured by a four-week average, at an annual rate of 8 percent. That is much closer to Fed targets for growth than were the rates before Oct. 6 actions.
The Fed also reported that M-2, a broader money measure that also includes most time deposits at commercial banks, fell in the week ended Oct. 24. M-2 dropped from $938.9 billion the previous week to $937.7 billion.