INTEREST RATES

Wanganui Chronicle, Volume 77, Issue 151, 28 June 1934, Page 9

INTEREST RATES

LONDON AND DOMINIONS. The low interest rates for call loan on the New York Stock Exchange, ranging from I per cent, up to 1 per cent., for some time past, and the low discount rate quoted by the Bank of (England—2 per cent, since June. 1932 iare taken by some people as indications that bank lending rates in Australia are unduly high. Those people, says I the National Bank of Australasia in its (latest summary, fail to realise that the low rates mentioned apply only to special limited classes of transactions; also that they are abnormally low, as the result of a combination of conditions and pressures which prevent an upward movement- The funds used to provide those low interest bearing loans are.to a large extent, ‘‘refugee” money, seeking securing, almost regardless of the income it earns, and preserving liquidity, so that its owners may make immediate use of it should opportunity offer. In addition, there is some concerted movement to keep interest rates at low levels, partly to avoid attracting “refugee” money, partly to ease ■the interest burden of puulic debt, and (partly to encourage business enterprise (and activity. I Though the rates at the base of the 'credit structure are so low, the bank (states, the rates for ordinary lending loperations are, both in England and the I United States, on a higher plane. In (the Feedral Reserve districts of New York, Chicago, and San Francisco, the interest on loans to farmers is quoted at from 5‘ to 6 per cent- per annum. In England the rates for loans and overdrafts range from 4 to 5 per cent., the higher rate applying mainly in the provinces. On the other hand, the I maximum rate which an English bank I would pay for money deposited is quoted at 14 per cent., which compares with from 2 to 2} per rent, paid on term deposits by Australian banks.