Reserve Bank lowers its lending rate

Press, 12 November 1977, Page 18

Reserve Bank lowers its lending rate

The Reserve Bank of New Zealand has reduced its ilender-of-last-resort rate to the trading banks, and official ■ money market dealers, from ■l2 per cent to 10 per cent. The decision was made by I the directors of the bank in l the light of the Gove.n■ment’s recent measures to flatten out the down-turn in the economy and to ease interest rates from their curirently high level, says the I governor of the bank (Mr R. W. R. White). The market for short-term money in New Zealand has been subjected to some fairly acute pressures since interest rate competition was reintroiduced in March, 1976.

These pressures had kept interest rates for large sums of short-term money at persistently high levels with consequential effects on other interest rales.

The reduction in the bank’s, together with the increase in trading bank free reserve assets, and the proposed rax recycling measures recently announced should diminish these pressures and reduce interest rates, says Mr White.

It is understood that the trading banks have never used this borrowing facility from the Reserve Bank, but they regard it as a benchmark for rates generally.