BANK RATE REDUCTION

Evening Star, Issue 19063, 5 October 1925, Page 5

BANK RATE REDUCTION

SURPRISE IK LONOOK WELCOMED BY STOCK EXCHANGE. Press Association—By Telegraph—Copyright. LONDON. October 1. The reduction in the bank rate to 4 per rout, surprised everybody, especially because it was not made last week, as was expected, when it would have enabled a higher price to be obtained for the conversion loan. Apparently it has now been made, as there is no longer any anxiety regarding the New York exchange, the recent weakness of which lias aroused some fears of the withdrawal of gold to America. The reduction was welcomed on the Stock Exchange, which responded with a general marking up of the prices of giltedged stock. Traders generally also hope that it will give a fillip to business.—A. and' N.Z. Cable, REASON EXPLAINED. LONDON, October 1. The city editor of ‘The Times ’ sots; “ The reduction of the bank rate is duo to the anomalous monetary situation following the restoration of the gold standard in April. Gold lias flowed into the country.instead of out of it, as had been feared* but the inflow was not on account of the improved trade position, but because _ the moneys deposited could bo agaiiy withdrawn in gold. This induced foreigners to renew their sterling balances. The flow continued to such an extent that the hank reduced the rate to 4$ per cent. _in order to watch the effect on the foreign balances. These were consistently withdrawn, but the monetary rise nevertheless continued, rendering the rate totally ineffective. The bank therefore has now decided to try the experiment of a 4 per cent., rate, but the real trouble is the foreign Joan embargo, which has been maintained too long, thus defeating the working of the gold standard. If the embargo had not existed there would probably have been no need for a reduction of the rate.”— ' The Times.'