The Birmingham age-herald. [volume] (Birmingham, Ala.) 1902-1950, 1906-10-20
BANK OF ENGLAND
CAUSES SENSATION
Discount Rate Goes u p to 6
Per Cent
CAUSED BIG RUSH TO SELL
Fears Expressed That Some Undls-
closed Development Was Behind
the Drastic Measure
Adopted In London.
CAUSED BIG RUSH TO SELL

New York, October 19.-The Bank of
England sent a sensation pulsating
through the financial markets of the
whole world by its unexpected action to-
day by advancing its official minimum
discount rate from 5 to per cent follow
ing an advance from to per cent on
October /. Speculative positions in all
markets was disturbed and the effect on
New York seems to have>been more acute
even than in foreign markets. The rush
to sell at the opening of the market here
was emphasized by vague fears that some
undisclosed development may be behind
the drastic measure thus adopted by the
great central institution of English
finance. Some financial difficulty in the
banking world. or a new phase of the Rus
sian financial situation was most feared.
Prompt inquiry established the fact that
nothing more was involved than the neces-
sity that was forced on the English bank
TO stop the drain on its reserve fund.
The immediate factor in precipitating
the action was the threatened withdrawal
of 100000 of the bank for shipment to
Egypt. This in itself would make an in
road on the depleted reserve supply which
would suggest peremptory measures to
check it, The downward plunge in sterling
exchange in this market also opened the
way for renewed negotiations for securing
incoming gold in London for New York
account. The effect was an immediate re-
bound in exchange here There was some
later reaction in exchange rates with the
running up of the money rate in New
York. Rates for time loans was strongly
bid at per cent for all dates, and eff
forts were reported to negotiate some
very large loans on time. Tenders were
little inclined to place funds except for
the longer period. Call loans advanced to
Z per cent comparatively early in the day.
The forecasts of the weeks currency
movement did not tend to ease the tone of
the money market, Outgo to the interior
by express seems to have amounted to
nearly 100000 The shipments to Can
ada, and a remittance to Manila have
called for almost as much more, but these
were about offset by the gain in sub
treasury operations and the receipt of
foreign gold. The net loss to the banks,
however, lis estimated at from $4,000, 600
to $1,000 000
The present course pursued by the Bank
of England has its latest parallel in the
period following the outbreak of the Boer
war in 1899. After raising the official rate
to per cent in November. the rate went
TO per cent on the last day of Novem-
Der. This action was not Immediately eff
fective in the open money market in Lon
don. nor on the exchange rate in New
York. But in the course of December gold
began to go out from New York, and
Withdrawals in spite of the acute strin-
gency In the call money market, which
finally ran the rate up to IS per cent at
the stock exchange in the third week of
December.
Drastic liquidation in the stock market
was forced before the stringency was
broken. Practically no other subject was
considered In the market today, although
the levying of fines on New York Central
for giving of rebates and the conviction of
the Standard Oil company in the suit for
conspiracy in the Ohio, courtswere cited
as incidents likely to have pressure on the
markets. These and all other considera-
tions were swallowed up by the dominant
effect of the response in the money mar
kets to the Bank of England's action. The
stock market was quiet and free from