U.K. Bank-Rate Cut Spurs On Shares

Press, Volume CVI, Issue 31322, 18 March 1967, Page 18

U.K. Bank-Rate Cut Spurs On Shares

(N.Z. Press Association—Copyright) LONDON, March 16. Spurred by the new cut today in the bank interest rate, sterling and most share prices improved within minutes of the announcement

The cut, from 6| to 6 per cent, comes after a cut from 7 per cent on January 26.

The bright reception given the cut was reflected in higher share prices for most of the industrial giants. The “Financial Times” price index—regarded as a barometer of price trends— Jumped 2.7 points during the day. Sterling Higher Sterling, which opened on the foreign exchange market at 2.7955 dollars, leapt to 2.7961 during the afternoon. It reflected Britain’s continuing economic recovery after two years of crises. Although Government spokesmen quickly made it clear that the lower interest rate did not necessarily mean

an easing in the economic freeze-and-squeeze policy, the mere fact that money became cheaper was welcomed by industry. Cheaper Loans It means that industrialist? planning massive development schemes to raise productivity will not have to pay so much for borrowed finance. The direct effect of the reduced rate on the man in the street will be marginal. Those with bank overdrafts —the few who have managed to get through the credit squeeze—will benefit But millions of people buying their homes through building sociey loans will

have to go on paying at the present higher rate, at least for some months. The growing strength of i sterling was one of the main reasons why the Bank of England felt justified in making today’s cut. New Confidence A succession of events in the last few weeks has given sterling this new confidence throughout the world.

Gold and dollar reserves have risen. The world’s bankers have promised to continue backing the currency against a fall. Britain’s overseas trade is getting within a few million sterling of being in balance. Surplus The last quarterly balance of overseas payments showed a surplus of £l2lm—the best result since 1959. Britain’s lower Bank Rate comes after recent cuts by West Germany, Sweden and Holland.

It is after the pattern set by the Finance Ministers of five Western countries who agreed at a January meeting here that world interest rates must come down.