Banks cut prime rate to 4 pct after Fed acts

NEW YORK (Reuters) - U.S. banks on Wednesday began to lower their prime rate, a borrowing rate that lenders charge their best customers, to 4 percent from 4.50 percent.

Bank of America Corp and JPMorgan Chase & Co, the nation's largest retail lenders, were the first to announce cuts, and rivals are expected to follow.

The decreases came after the Federal Open Market Committee, the policymaking body of the U.S. Federal Reserve, lowered its key overnight rate on loans between banks by 0.5 of a percentage point to 1 percent.

It cited a marked slowdown in economic activity, "owing importantly to a decline in consumer expenditures," in announcing its unanimous decision to cut rates.

Most lending institutions use the overnight rate, known as the federal funds rate, as a benchmark for what they charge consumers for everything from credit cards to home loans.

(Reporting by Jonathan Stempel; Editing by)