U.S. CREDIT MARKET OUTLOOK - PRIME RATE The prospect that other banks will follow industry leaders Citibank and Chase Manhattan in raising their prime rate is likely to cast a pall over the credit markets today, economists said. Bond prices had been making a smart recovery from two days of heavy selling when Citibank surprised the market by announcing a quarter-point increase in its prime rate to 7-3/4 pct. Chase Manhattan quickly followed. Prices quickly fell by a full point, even though the dollar - the market's overriding concern of late - rose sharply on the news. Citibank cited the higher cost of money, especially in the Euromarket, as the reason for raising its prime rate. Part of this rise in market rates has been caused by fears of a tighter Federal Reserve policy to defend the dollar, but economists said it is too early to tell whether the Fed, whose policy-making federal open market committee, FOMC, meets this week, is already tightening its grip on credit. "The Fed seems to have been a bit slow in meeting the banking system's reserve needs this statement period, but I wouldn't conclude anything until I've seen the Fed data," said Jeffrey Leeds of Chemical Bank. REUTER^M