U.S. Bank Rate Raised

Press, Volume CVIII, Issue 31659, 20 April 1968, Page 13

U.S. Bank Rate Raised

(N.Z.P.A.-Reuter —Copyright) WASHINGTON, April 19. The United States Government yesterday raised Bank Rate to its highest level since 1929 to restrain a booming economy and rebuild foreign confidence in the dollar.

The Federal Reserve Board which runs the United States central banking system, said effective from today the discount rate would go to 5.5 per cent from the 5 per cent level set only last month. The board said the action was taken “to restrain intensifying inflationary pressures and to strengthen the position of the dollar at home and abroad.” The lift in the discount rate—the third since sterling was devalued last November —was expected to lead to higher interest rates throughout the economy. Major commercial banks were expected by some officials to raise immediately their own interest rates on loans to their biggest corporate customers from the present 6 per cent level. President Johnson’s chief economic adviser, Mr Arthur Okun, had said only a few hours before the board’s move that the present “fran-

tic” expansion of the United States economy was not sustainable. The board also raised to 6.25 per cent from 5.5 per cent the maximum interest which commercial banks can pay on so-called certificates of deposits over $lOO,OOO. Large banks were in danger, some officials said, of losing deposits in this form as interest rates on other forms of investment rose. On November 20, the board raised the discount rate to 4.5 per cent from 4 per cent as a precautionary move after the devaluation of sterling. On March 15, the rate was raised to 5 per cent at the height a gold buying frenzy overseas.