Many of the nation's major banks today boosted the prime lending rates to 18.25 percent, another record, two full percentage points higher than their prime rates two weeks ago.
In other developments, the bond market rallied slightly while the stock market fell on news that President Carter would unveil his long-awaited anti-inflation package late Friday afternoon.
Chase Manhattan Bank, New York's second largest, touched off the round of half-point prime rate increases, quickly followed by Marine Midland of New York, Chicago's Continental Illinois and several large West Coast banks.
Other major banks, including New York's biggest Citibank, are expected to follow Chase's lead Friday.
Chase said the increase to 18.25 percent -- from 17.75 percent -- brought the interest it charges its best corporate customers for a loan closer to what it costs Chase to borrow money in the open market.
Big banks have been playing an effective interest rate of 18 percent or more to borrow funds they in turn lend to their customers.
The latest increase in the prime rate fuels speculation that the Federal Reserve Board will be forced to raise its discount rates from the current 13 percent to 15 percent or more.
With the wide disparity between market interest rates and the interest banks can earn on loans to customers, banks will find it increasingly attractive to borrow from the central bank at 13 percent and lend funds to their customers at 18.25 percent.
The nation's bond markets, which have been decimated by high inflation since the first of the year, rallied today after news reports and that President Carter would release his anti-inflation package Friday afternoon.
The package reportedly will call for federal spending cuts of about $15 billion, control on the extension of some forms of credit and attacks on oil designed to cut the consumption of gasoline.
The bond markets have been hanging on the anti-inflation package for weeks, rallying on reports that the president would order credit controls, then dropping back when no package was forthcoming.
Peter Goldsmith, chief of fixed income research at Merrill Lynch, Pierce, Fenner and Smith, said that on the average, bond prices rose about $20 on a face value of $1,000.
Goldsmith said the bond market rallied not only on the news of the impending White House announcement but also because of the prime rate hike.
Although some analysts have predicted dire increases in interest rates to 20 percent or more, most think that interest rates are at or near the peak of their cycle. Because bond prices rise when interest rates fall, and vice versa, a peaking in interest rates should help the beleaguered bond market.
Other analysts said, however, that the rise in bond prices also is a attributable to recent Federal Reserves moves to buy securities from dealers and an insurance move on the part of many dealers to cover their "short" positions, believing that prices will rally, at least briefly, when the president finally annonces his package.
When a dealer is short, he has promised to sell bonds that he does not have in the belief that prices will fall and he can make a profit by buying them at a cheaper price than he has provmised to sell them for.
While hopes were high in the bond market, the stock market took much more of a wait-and-see attitude on the president's package.
The Dow Jones industrial average of 30 stocks fell 9.98 points to 809.56. The Dow average, which topped 900 points briefly last month, is now almost back to the level with which it began 1980. The market rallied continuously for the first six weeks of the year.
Newton Zinder of E.F. Hutton & Co. said stock investors have been more concerned with a recession than with inflation in recent days. He noted that commodities prices -- from gold to cattle to grains -- have been collapsing in recent weeks after rising sharply during January.
"It's beginning to look like Gerald Ford's WIN program all over again, Zinder said.
In 1974, shortly after he was inaugurated, Ford announced a voluntary anti-inflation effort he dubbed WIN, for Whip Inflation Now. The WIN program had been announced less than a month when the economy began to side into its worst recession since World War II.
Stock investors, are becoming increasingly worried that the sky-high interest rates triggered by the Federal Reserve as part of its anti-inflation program will tighten credit so much that a severe recession will result.
The DOW Average had traded in a narrow range until midday, when it fell off sharply. Prices rallied in the afternoon, but in the last half hour of trading the Dow average lost about 5 points.
Volume on the New York Stock Exchange totaled 33.47 million shares, off from Wednesday's 37.99 million. Nearly 930 stocks fell in price on the NYSE, while 502 rose.
The New York Stock Exchange composite index fell 0.66 to 60.20.
On the American Stock Exchange, the index fell 5.31 to 266.11. More than 350 shares lost price on the Amex, while 222 gained.
One of the biggest losers on the NYSE, which had a major impact on the entire market, was International Business Machines, which fell $1.125 a share to $60.125.