THE BANK RATE

Dominion, Volume 23, Issue 33, 2 November 1929, Page 11

THE BANK RATE

REDUCED IN ENGLAND TO 6 PER CENT. EXPORT OF GOLD CHECKED INFLUENCE OF SLUMP IN NEW YORK (British Official Wireless.) (Rec. November 1, 5.5 p.m.) Rugby, October 31. The decision of the directors of the Bank of England to reduce the bank rate from 6] per cent, to 6 per cent, came as a welcome surprise to financial circles, where it had not been expected that the rate would fall for some little time yet. When the rate went up by 1 per cent, on September 26 It was explained that this was due to the continued withdrawals of gold from the Bank of England. In fifteen weeks the bank !>»’ lost more than £30,000,000 in gold to the Continent and America. Obviously the raising of the rate has had the intended effect of stopping the flight of gold. Another factor that made the lower bank rate possible was the slump in New York. This has sent much gold back to England. When the decision became known there was a general marking up of prices, particularly of British Government securities. (United Press Association.—By Electric Telegraph.—Copyright.) London, October 31. The Court of Directors of the Bank of England to-day announced that the bank rate of discount had been reduced to 6 per cent. The reduction in the bank rate is regarded in the city as an indication that the emergency which caused the last advance has now passed. / French demands for gold are expected to cease for the time being. The reduction had an immediate favourable effect upon the Stock Exchange. Prices firmed all round, and notably so on gilt-edged securities, with Australian Government securities especially strong. LONDON MARKETS BUOYANT REASONS FOR LOWERING RATE (“Times” Cables.) (Rec. November 1, 11.15 p.m.) London, October 31. The reduction in the bank rate was most unexpected in the city, but all reductions are popular, consequently the markets became buoyant. Gilt-edged securities rose sharply, industrials especially, and internationals recovered strongly. The reasons for the lowering of the bank rate were:—(l) The previous rate, though short-lived, caused exchanges in favour of Britain to move more rapidly than anticipated; though it did not stop the outflow of gold it checked it with unexpected effectiveness; (2) nine millions worth of gold is en route to London; (3) the collapse of New York, by easing the money situation there, caused a return of European funds. Finally, the discount rate was far below the bank rate, with a probability of the New York discount rate falling, as actually occurred to-day. The London Bank rate could not be kept up when gold began to flow from New York to London. The bank certainly took a bold step, and it is to be hoped it will not cause the exchanges to move adversely and check the process of replenishing the depleted gold stocks. DECREASE REFLECTED ON SYDNEY EXCHANGE (Rec. November 1, 10.40 p.m.) Sydney, November 1. The Stock Exchange at Sydney today reflected the decrease in the bank rate, business being the brightest for months. NEW YORK RATE REDUCED New York, October 31. The Federal Reserve Bank of New York reduced its rediscount rate to 5 per cent., placing New York on a parity with eleven other reserve institutions. New York call money was 6 per cent, all day. CANADIAN BANKS NOT SHIPPING GOLD ' Montreal, October 31. The “Montreal Star” on Thursday said: “Because of the stringency which has existed in Canada for money, and in order to protect Canada’s position with regard to its gold holdings, the country has been unofficially off the gold standard for some six months. At the verbal request of the Minister of Finance, Mr. J. A. Robb, the banks refrained from shipping gold, although Canadian currency is at a discount, making New York shipments profitable. Although the condition has been existent for some time, it is not- generally known that Mr. Robb had taken a step which investigation now shows he had. The situation is one which is regarded as being extremely acute, but it is believed that the condition will right itself in the ordinary course of events.” DEPARTURE FROM GOLD STANDARD DENIED (Rec. November 1, 9.15 p.m.) Ottawa, November 1. The Federal Department of Finance has denied positively that Canada has departed from the gold standard.