New-York tribune., 1921-06-16
Reserve Bank
Cuts Discount
Rate to 6 II. C..
Easier Credit Conditions
in Country Factor in
Second Reduction lsy
n. Y. Institution in 1921
Back on Early 1920 Level
Decline in Member Borrow
ings and Big Gold Imports
Tend TO Improve Position

Recognizing the general trend toward
easier credit conditions in this dis
trict aud in the country as whole, the
Federal Reserve Bank of New York,
acting with the approval OF the Federal
Reserve Board at Washington, ycster-
DAY lowered it's discount rate on ad-
yances to member hanks against COM
mercial paper from "a to 6 per cent.
Governor Benjamin Strong of the bank
announced this action after the close
Of the financial markets and said it
spoke for itself.
The reduction was generally ex-
pected in view Of the extraordinary an
provement in recent weeks in the re-
serve position OF The New York bank
and is the second made so far this
year, the rate having been cut on May
!, from I to 6ja per cent. The latest
cut puts the rate back 70 the level in
effect until June of last year,
when the local bank marked its rate
UP full ! per cent to the per cent
quotation, which continued in effect
Until early last month.
The formal statement issued yester-
day by Governor Strong reads as fol-
lows: effective from the opening of
business on Thursday, June Is, 1921,
and until further notice, and super
seding all existing rates, the Federal
Reserve Bank of New York has advised
its member banks. in q circular issued
to-day that it has established rate
of per cent for all rediscounts and
advances"
Now Maximum Rate
With the new commercial discount
rate of per cent IN effect, this be-
comes the maximum rate on any kind
of paper turned in by member banks
for rediscounting. The rate for ad-
vances not exceeding fifteen days on
Liberty loan bonds, Victory notes or
United States Treasury certificates of
Indebtedness and customers notes Sc
cured by one of the foregoing and for
rediscounts of customers notes, so Sc
cured for periods not exceeding nine
ty days remains unchanged at per
cent. Also the rate for advances not
exceeding fifteen days secured by
bankers aceep .ances and for ,edis-
counts of the same not exceeding
ninety days also remains at S per
cent.
The effect of the latest move Of the
local Reserve Bank toward getting
- back to normalcy in the matter of off
cial rates OF discount is expected to
be reflected in the open market for
commercial rediseounts by an easing
tendency in rates. Here the market
las been maintained around per cent
since the reduction in May in the bank
rate from 7 to Il per cent.
peaation of credit has proceeded
,.,
vsnlber when the peak OF loan ex-
pansion was reached AT that time the
redlscouRts ofr the Federal Reserve
Bank Of New York stood at s98S, ,262-
G22. representing the borrowings of
member banks at the central institu-
tion. AT the end of May this total had
fallen to $528,357 s636. the reduction re-
aectIng the progress thathas oeen made
by member banks in hgLtA ating their
was throeek tszI s.Gdidation. of member
bank lGzHs 10 their customers that
they were able TO cut down their re-
discounts.
Gold Imports Help
Heavy accessions of gold from
abroad have also been potent factor
iH strength ening the position of the
New York bank, its gold reserves hav-
ing increased in q year from $548,
406 o00 TO Ssf0,084, 900. At the end of
last week the local bank reported a
ratio Of total reserves TO deposit and
Federal Reserve note liabilities COM
hiped of 64.2 per cent, the highest
ratio in three years. compared with
SOS per cont the previous week and
406 per cent a year ago. after setting
aside 50 per cent gold to cover deposit
liabilities the local bank last week
reported ratio Of gold reserves to
Federal Reserve notes in circulation of
935 per cent, against S4-5 per cent the
previous week and 45.5 per cent year
ago.
The banking community was much
Interested yesterday to see what the
response of the Bank Of England will
be to the action of the local bank. In
May the reduction in the discount rate
here followed reduction in the Bank
OF Epglands rate from to 614 per
cent. the latter rate still being in eff
feet in London.