FALL IN BANK RATE.

New Zealand Herald, Volume LXVII, Issue 20596, 21 June 1930, Page 13

FALL IN BANK RATE.

NEW YORK ALTERATION. REDUCTION TO 2J PER CENT. BELOW THE LONDON LEVEL. By Telegraph—Press Association— Copyright. NEW YORK, Juno 19. The Now York Federal Reserve. Bank has reduced its rediscount rate from 3 per cent, to 2£ per cent. This is the first timo in the history of tho Federal Reserve Bank system that one of its banks has had a rate below 3 per cent. The New York official discount rate was reduced on May 1 to 3 per cent., the lowest at which it had ever stood. That reduction was made simultaneously with similar action by tho central banks in Britain and Franco, the London rate being reduced to 3 per cent, and tho Paris rate to 2£ per cent., tho latter being tho lowest since October 20, 1098, when it was raised from 2 to 3 per cent. The chief interest of the announcement from New York is whether it will be followed by corresponding adjustments in London and on tho Continent. In tho latter part of last year the London rate was 1 per cent, higher than the New York quotation; from the middle of December, the margin was per cent, and since March 20 the two rates have been identical. Reduction of the London bank rate to 2j per cent, would introduce a situation that has not occurred for 21 years. Following tho speculative "boom" and the financial "panic" in tho United States in 1907, the Bank of England discount rate roso to 7 per cent, on November 6; by six stages it was reduced to per cent., that rate ruling from May 27, 1908, to January 14, 1909. Then, owing to a serious efflux of gold, mainly to France, there was an increase to 3 per cent. The 2£ per cent, rate was restored on April 1 though only temporarily as, by tho end of 1909, the bank rate had risen to 5 per cent. The "traditional minimum" of 2 per cent, was last in operation in 1897.