U.K. Bank Rate Cut To 6p.c.

Press, Volume CIV, Issue 30768, 4 June 1965, Page 13

U.K. Bank Rate Cut To 6p.c.

(N.Z.P.A.-Reuter—Copyright) LONDON, June 3. Britain’s bank rate was dropped today from 7 to 6 per cent. Initial reactions were: “A complete and absolute shock. There may well be a run on sterling.” The last change in the rate was in November last year when the newlyelected Labour Government hoisted it from 5 per cent to 7 per cent in an effort to maintain the value of the hard-pressed pound. Britain’s reserves of gold and convertible currencies shot up last month by £lBlm sterling to exceed a stockpile of £looom sterling for the first time for two years, it was announced yesterday. Figures announced by the Treasury put the current reserves at £lo2lm sterling, compared with £B4om sterling at the end of April. The true value of Britain’s improvement in terms of trading, however, was an increase of £s9m sterling on the month. The fact that there is more gold and other currencies than this in the stock pile is because during the month borrowings were increased. The Government said that on May 25 the equivalent of £soom sterling was drawn from the International Monetary Fund and a further equivalent of £l4m sterling was provided by Switzerland. The rate of sterling against the dollar dipped immediately after the announcement but then began to recover. Shortly after mid-day the rate

was being quoted at 2.79 1-8 dollars compared with last night’s closing rate of 2.79 5-16 dollars.

Millions of pounds sterling were added to the value of gilt-edged securities on the Stock Exchange. Prices rose by as much as 15s. A Bank of England spokesman today emphasised the drop in the rate did not imply any relaxation of the restriction of credit. Almost simultaneously with the lowering of the bank rate the Board of Trade announced tougher hire purchase terms for cars, motor-cycles and many household goods. Mr Douglas Jay, president of the Board of Trade, ordered the minimum cash deposit by customers wishing to buy cars and motor-cycles on credit to be raised from 20 to 25 per cent. Minimum deposits on household goods other than furniture and bedding, cookers and heaters would be raised from 10 to 15 per cent.