BANK RATE REDUCED.

New Zealand Herald, Volume LXVI, Issue 20402, 2 November 1929, Page 13

BANK RATE REDUCED.

CHANGE TO 6 PER CENT. - • ; EMERGENCY NOW PASSED. REVIVAL OF CONFIDENCE. STOCK EXCHANGE RECOVERY 3;p Te'ecrsrh —Preps Association—-Copyright. - (Received November 1, R. 15 p.m.) British Wireless. RtXGBY. Oct. 31. "Hie decision of the directors of the Beimk of England to reduce the hank rate from 6£ to 6 per cent, was announced this rooming. The reaction is regarded as an indi--r_ ■ cation tha,t 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 immediately •favourable effect, on the Stock Exchange, »nd prices rose all round, notably in giltedged stocks, with Australian stocks especially strong. The decision came as a welcome surprise to financial circles, where it had not been expected that the rate would fall for Siome little time yet. When the rate was raised, on September 25, it was explained that this was due to the continued withdrawals of gold from the Bank of England; In 15 weeks the bank had lost more than £50,000,000 in gold to the Continent and America. Obviously the raising of the rate has had the intended effect of stopping the efflux of gold. f ' Another factor that made a lower bank rate possible was the slump in New York. " Th:.r» has caused the return of funds to England. / The bank rate was 7 per cent, for 12 months fropi April 15, 1920, being reduced "to (>J t per cent, on April 28 of the following year and by alterations at short intervals 'to 5 per cent, on July 15, 1922. Sincei then the following changes have been 5, 1925, 4 per cent-; March ssi 1925, 5 per cent.; August 6, 1925, per cent.; October 1, 1925, 4 per cent.; December 5, 1925, 5 per cent.; April 21, 1927, 4£ per'cenL; February 1, 1929, 5 5 per cent.; September 26, 1929, 6n per .cent.October 31, 1929, 6 per cent. , FOTJB FACTORS INVOLVED. £9,000,000 OF GOLD EXPECTED. RETURN /FLOW FROM NEW YORK. {Received November 1, 11.45 p.m.) Times Cable.' LONDON, Oct. 31. The reduction in the bank rate was most unexpected in the City, but. all reductions are j>oputer and consequently the markets became buoyant. Gilt-edged stocks rose sharply. Industrial shares, especially 'lnternationals, recovered strongly. .The reasons for the lowering the bank rate were firstly, that the previous rate, though short-lived, caused the exchanges in frvoar 6i Britain to move more rapidly tticin was anticipated, and though it did not stop the outflow of gold, it checked -- it With unexpected effectiveness; secondly, £9.000.000/"worth of gold are en route to London; thirdly, the collapse in New York. by .easing the money situation f.herti, caused the return of European fundi*; finally, the market discount rate was far belcw the bank rate.

With the probability of the New York discount rate falling, as actually occurred to-day, the LondoD bank rate would not be kept up when gold began to flow from New York to London. The bank certainly took a bold step; end it is to be hoped it will not cause the exchanges to move adversely and check the process of replenishing the depleted gold stocks. RESPONSE IN SYDNEY. STOCK EXCHANGE ANIMATED. [Beeeyred November 1. 11.45 p.m.) SYDNEY, Nov. 1. The Stock Exchange to-day reflected the decrease in the London bank rate. Business was the brightest for months. , SITUATION IN CANADA. £OI,D STANDARD MAINTAINED DENIAL OF SUSPENSION. .286 (Received November 1. 8.35 p.m.) OTTAWA, Oct. 31. A statement has been issued by the " Federal Department of Finance, posidenying the statement that Canada has departed from the gold standard. Thiis announcement was prompted by the following statement published in the Montreal; Star:—"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, tnak- ' ing New ' Ycrk shipments profitable. Although the condition has been existent for some time, it was not generally > known that Mr. Robb had taken the step 'J. which investigation now shows he did take. The situation is regarded as being extremely'' acute; but it is believed that the condition will right itself in the ordinary course of events." Canada formally returned to a gold standa/d on July 1, 1926, the war legislation suspending gold paymepts having been allowed to expire on the previous day, In "November of that year the president of the Canadian Bankers' Association Hinted, at the annual meeting of the ftßscciation in Montreal, that ' the fact that, our prices were at n parity gold permitted this readjustment to take place without any stress or strain whatsoever." THE NEW YORK KATE. R!i DUCT lON ANNOUNCED. : (Received November 1, 5.5 p.m.) • ' NEW YORK, Oct. 31. Mf] The New York Federal Reserve Bank 'to-day reduced its rediscount rate to 5 Si ,per <*»*•/ New York is thus again on a 'Ferity with the other 11 reserve inutitut.jons The New York rate was raised from 5 Hf 6 per cent, on August 8. None of the reserve banks followed this action*