of one percent to six percent, effective on Monday.

The base rate represents the benchmark for the pricing of all the bank's Bermuda dollar demand loans and overdrafts.

The institution's loan customers will get confirmation of the change on their next statements.

The bank's move came after the US Federal Reserve Board instituted the first US interest rate cut in almost three years. It also came as the US stock market was entrenched in a late day nose-dive.

A planned Bank of Bermuda press conference for yesterday afternoon to announce the rate cut was cancelled, although it may not have been connected to the plunging Dow Jones Industrials index -- down nearly 250 points at one point near the close.

The significant dip in the Dow was related to developments in Japan and the concern about the Asian financial crisis. But the Dow had earlier plummeted at the Fed's Tuesday announcement, and there was speculation that some residual effects on the market remained.

The Bank of Bermuda noted that Fed chairman Alan Greenspan explained the US rate reduction by emphasising that the crisis in emerging market economies was now affecting North America, and may actually intensify. The Fed's move was rationalised as fending off economic turmoil from America's shores and propping up global investor sentiment. Volatility in the equity markets may not have been foreseen, at least not to the extent of the Dow's substantial drop.

Here at home, the bank's senior vice president retail clients, Alan Richardson, commented: "With the increasing need for flexibility for residents to transact in either Bermuda or US dollars, we find it necessary to tie our local rates to those prevailing in the United States in order to remain competitive for both deposits and loans.

"While this decrease in our base rate will be welcomed by Bermudian borrowers, it is important to remember that what is driving it is an unsettled global financial environment.'' The Fed Tuesday announced it was reducing the benchmark federal funds rate on overnight loans between banks by a modest one-quarter of one percent from 5.5 percent to 5.25 percent.

And there was speculation that another cut of a quarter of one percent might be on its way before year's end.

The Bank of Bermuda's change, which may be followed by the Bank of Butterfield, also comes after the Canadian central bank, the Bank of Canada, followed the Fed by cutting its benchmark rate for overnight loans by one quarter of one percent.