BRITISH BANK RATE

Wanganui Chronicle, Volume 73, Issue 103, 3 May 1930, Page 9

BRITISH BANK RATE

REDUCTION TO 3 PER CENT LONDON, Alay 1. The bank rate has been reduced to 3 per cent. NEW YORK RATE REDUCED NEW YORK, Alay 1. The New York Federal Reserve Bank has reduced the rediscount rate from 34 to 3 per cent. FRENCH RATE 2 \ PER CENT Received Alay 2, 7.40 p.m. PARIS, May 1. The bank rate has been reduced to 24 per cent. SIMULTANEOUS REDUCTIONS. WORLD CONTROL INDICATED. Received Alay 3, 1 a.m. LONDON, Alay 2. The Daily Alail says that the simultaneous lowering of the British and Franco-Belgian bank rates points to co-operation in tlic world's control by banking authorities and indicates that advancements have buen made to avoid bi„ gold movements. The Bank of France’s reduction to per cent, is the lowest since 1898. British trade and industry are not expected to greatly benefit from the reduced rate as the big banks are refusing to lend customers below a minimum of 5 per cent., irrespective of the change in the bank.

On March 20 the Bank of England reduced the official discount rate by one half per cent, to 34 per cent. By successive reductions each of one-half per cent it has been brought down from 6i per cent, in September to the present level. The financial editor of the Alnnchoster Guardian referring to the fail, said: “This is part of a deliberate policy in which the baz« of England is acting along with other central banks to counter the effects of the' world fall in prices. The Government has also done its bit in shaping circumstances for a very low bank rate by redeeming Treasury bills thus depriving the short-loan market of a usual channel of investment, and forcing down rates in that market. The fall of wholesale process which has taken place in the last five years, and conspicuously during the last year, disturbs the equilibrium of business life through the world but a reduction of interest rates tends to restore it. If prices were to go on falling while interest rates remained high, that would discourage sensible people from borrowing, since the money borrowed in the present would be worth less in terms of what it would buy than the interest to be paid in the future when prices were lower and a fixed sum of money in consequence was harder to earn. But if interest rates also came down then the borrower is not entering into a contract against his advantage. With bank rate down during the last six months by 3 per cent., the average industrial or trading borrower c:v*i raise money that much cheaper from his banker.’’ It is only possible to make a reduction in the bank rate when the country is not over-burdened with indebtedness. The test is the exchange rate, and as British currency stood at a premium against other currencies, it was possible to cut down the bank rate. The point of interest to use is that the low bank rate will promote industrial enterprise in Britain, and thus provide more buyers for our produce. The present rise in the prices of dairy produce may have been aided by last month’s reduction in the bank