RESERVE BANK POLICY

Press, Volume XCI, Issue 27664, 21 May 1955, Page 8

RESERVE BANK POLICY

CONSULTATIONS WITH TRADING BANKS (New Zealand Press Association) r WELLINGTON, May 20. It was not true that, on many occasions, decisions had been made by the Reserve Bank before the trading banks had been consulted; he did not know of one occasion on which this had been done, said the Governor of the Reserve Bank (Mr E. C. Fussell), m evidence today before the Monetary Commission. Questioned by Mr G. G. G. Watson, a member of the commission, Mr Fussell said the Reserve Bank’s statutory powers would not take it very far with the trading banks. Mr Fussell said it was preferable to rely upon “powers of persuasion” with the banks. He undertook to provide a memorandum on the point of possible expansion of the Reserve Bank’s statutory powers. A disagreement between himself and the Government on a major matter of policy, such as an alteration of the exchange rate, would have to be very grave indeed to be argued in the House of Representatives under the provisions of the Reserve Bank Act, said Mr Fussell. Political actions could be just as inflationary in their result as monetary actions.