Following moves made by the U.S. Federal Reserve, Bermuda's three retail banks lowered their interest rates yesterday.

The Bank of Bermuda and Capital G dropped their interest rates by 0.5 per cent, while Butterfield Bank dropped its by 0.25 per cent.

The Bank of Bermuda's half-per cent cut applies to all mortgages, commercial loans, personal loans, and Bermuda and U.S. dollar credit cards, effective immediately, a statement issued yesterday said.

Similarly, Butterfield Bank reduced its Bermuda dollar base rate by a quarter of a per cent to 5 per cent yesterday.

"We are pleased to pass on the benefits of lower U.S. interest rates to our customers who borrow from us at rates linked to the bank's Bermuda dollar base rate," a spokesperson who did not give their name said. "We are also reducing our U.S. dollar prime rate to 6.5 per cent, effective [yesterday]."

But the bank is leaving its Bermuda dollar strata savings rates unchanged for the time being, according to a Butterfield Bank statement.

Capital G's rate cut applies to all of its Bermuda dollar loans, according to the bank's chief relationship management officer, Ian Truran.

Acting on fears of a recession in the U.S., the Fed yesterday lowered interest rates - which influence how much U.S. customers pay on credit card, mortgage and auto payments - by three-quarters of a percentage point, to 3.5 per cent.

"At this stage in the interest rate cycle, the bank has decided to reduce loan rates in concert with the actions taken by the U.S. Federal Reserve," said Philip Butterfield, Bank of Bermuda's CEO.

"It should be noted that Bank of Bermuda determines its base rate independently, based on a number of factors, including the U.S. Federal Funds Rate, set by the Federal Reserve Board, as a benchmark to remain competitive and provide the best possible service to our customers," he added.

Mr. Truran said also that while interest rates in Bermuda do not always follow those in the U.S., conditions were right this time around to warrant a reduction.

"We weigh up a number of factors in deciding our interest rate levels and try to be consistent for both our borrowing and savings customers," he said.