British interest rates raised reluctantly

Press, Volume CXVI, Issue 34138, 27 April 1976, Page 27

British interest rates raised reluctantly

(N.Z.P. A.-Reuter —Copyright)

LONDON

The Bank of England reluctantly decided to increase British interest rates on Friday to protect the pound sterling after yet another attack on the currency throughout Europe.

In an unusual move after selling pressure had forced the pound down to new lows on foreign exchanges, the bank stated publicly that British interest rates were too low, and would have to go up because of the weakness of sterling. At the same time the bank forced an immediate increase in some interest rates in the domestic money markets. Higher interest rates will encourage people abroad, such as Arab oil investors, to keep their funds in London, but at the same time higher domestic interest rates could hamper long-overdue investment by British industry by making borrowing more costly. British authorities had been extremely reluctant to

■ raise their interest rates at a I time when the economy is ; just recovering from reces- : sion. The bank was forced to act : after sustained selling from i all major European centres ■ forced sterling down against the United States dollar and to new lows against the Ger- ; man mark and several other i currencies.