BANK RATE.

Auckland Star, Volume LX, Issue 33, 8 February 1929, Page 7

BANK RATE.

INCREASED TO 5}

Step Necessary To Protect Gold Stocks. WEEKS HEAVY EFFLUX. (A---:.-.-::.-t :- y: Assn.— United Service.) (P.- Ivp.i io a.m.) LOXDOX, February 7. T\> :■■■:■; ::r.o has been advanced to •'? r» :• (■■ :.:. The advance followed n :.. • <:";!:ix dunug the week of .£.'>.'* ■■ ■■ 40 ;n ; r old, reducing the stock • : C"!d ni the Bank of England's ■-• ;■• department slighth be:-v>- t...-j .C:.j(i.<)ijiJ.OoO laid down by the i ;:.'..:;■•" C.mmittee as the amount ;i-^ r -:..'u!d be held on the amalgarr.ri:. n r.f the note issues. It is understood the Bank of England advanced ':.■ rate to stop this heaw drain and to prevent the situation getting out of Land. The '•M.-irnins Post" points out that during a period or" a little over five months "ur loss of gold has been £28,500.0('i0, y.-t these huge expoits had no material effect upon the American, exchanges. I

The rise in the bank rate, which has been v.:i-..i!!v forced upon the Bank of England, as an m I.rect effect of the prolonged or-v ni =:••-■(illation in U.S.A., has not been a.tr■-■ ■: ;>■ r unexpected in Threadneedle Street. At the clnse of the year financial c:: . s anticipated an exceptionally stringer,: l:n:e. Clearing banks statements for X; ■■.::;' t-r shewed a bill holding of 250.6 m:I!: .n sterling, as against 235.3 minion at the corresponding period of th" previols year. Over the same p--nr-! acceptances had risen from 107 milh'.'Ti to 200... million, while the volume <■'. T:easury Bills outstanding was £7"s.oOO.i"ifiu, ~r over £100.000.000 in eicess of_ tiie n.-ure at the corresponding period of the previous year. Under the circumstances it is not surprising that with such a keen demnnl for accommodation there were apprehensions of a rise in the hank rate early in the New Year. The rate of 4 u j per cent was hxed ori April 21. 1P27. and had remained unaltered emce that time.

FEAR IN LONDON

Excessive Speculation In NewYork. TO REPLENISH GOLD RESERVE. (British Official Wireless.) (Received 12 noon.) RUGBY, February 7. The raising of the bank rate from 4\ to 5} per cent was not altogether unexpected. Since last September, when the Bank of England's stock of cold stood at the high record of £176^500,000. there has been a continuous drain of gold, first on account of Germany and recently'for New York. The excessive speculation on the New York Stock Exchange has forced up money rates af that centre and while they remained considerably above those in London the fear of gold withdrawals from here remained.

There have been no indications of the .ilackening of speculative activity in America, despite attempts to check it «nd the Bank of England is, therefore, obliged to protect itself. Bank of England directors also had to look ahead to the autumn months when this country has to make heavy payments to America for grain, etc. The bank has, therefore, to replenish its gold reserve during the spring and lumraer months and although it was Loped that this might be accomplished Tith a 4J per cent bank rate, it is evident that conditions abroad have forced the hands of the bank. The bank rate has not been as high •« 54 per cent since 1921.

BREAK IN WALL STREET.

ONE OF WORST IN YEARS. (Australian nnd N.Z. Press Association.) (Received 10 a.m.) NEW YORK, February 7. The Stock Exchange, experienced one of the worst breaks in years and the second largest in its history. Prices declined at the opening on enormous transactions. They rallied later on support, but sold off towards the close. many issued breakikng below morning lows.

Dealings were so active that at one time the tape was over half an hour late. Radio Corporation broke nearly 30 points from the previous elo=e. The market had been risin? sharply lately *nd the technical position had become very weak. It was. therefore, considered natural that when London raised the rediscount rate and the Federal Reserve Board announced a more stringent policy regarding brokerage loan=. that prices should break. Preliminary figures showed a decline onlv surpassed by that of December S last.