New-York tribune., 1921-04-15
Discount Rate
Cut by Boston
Bank to 6P.C.
First District Federal Re-
serve Institution Leads
iii lowering Restrictions
on Credit; Tone Easier
No Change in Policy Here
Seven of Twelve Have Lower
Scale OH Commercial Pa.
per; Bankers Interested


BOSTON, April 14.--The Federal Re-
serve Bank of Boston to- day announced
reduction in its rediscount rate from
7 to per cent. The latter rate has
oeen In effect since last June At the
same time an increase in the rate on
treasury certificates from SO to G per
cent was announced. The official state
ment issued by the Federal Reserve
bank follows:
The Federal Reserve Bank of Roston
WILL ehecttve tomorrow, April -, re-
ouce Its discount rate on commercial
and industrial and other unsecured
paper from to per cent. Al the
same time the discount rate on notes
secured by United States certificates
OF Indebtedness will be changed from
5 "a to per cent. All of the published
discount rates Of the Boston Reserve
Bank will then be uniform at s per
cent.
"Thc last change in the Boston dis
count rate was on June 4, 1920, when
the per cent commercial rate was
increased to per cent.
Four on Per Cent Level
by this change on the part of the
Boston bank seven of the Federal Re
serve banks now have per cent
rate on commercial paper, five others
New York, Atlanta, Chicago, Mime
apolis and Dalas-having Z per cent
rate. Four of the reserve banks--Bos-
ton, Cleveland, Richmond and San
Franclsco--will now have q fat per
cent rate for all classes of discount.n
This is the first step taken by any
of the twelve Federal Reserve banks
toward making it possible for member
banks to borrow at the central institu-
tons on rediscounts on a more favor
able basis, and is considered highly sig
nlfcant, as refecting Improvement in
the general credit situation and pos
sibly foreshadowing similar action by
reserve banks in other districts.
Officials of the Federal Reserve Bank
of New York discussed credit condi-
tlons az a conference at the local bank
yesterday, but following their usual
policy would say nothing about dis
counts. Pierre Jay, agent of the bank,
when informed last night Of the action
of the Boston bank, would not comment
upon it, stating that it was one of the
infexiblue rules of the local bank for
its officers not to talk about discount
rates.
No Change Foreseen Here
Representative bankers whose opin-
ION was asked concerning the reduc
tion in discount rates at Boston said
they considered it indicative Of the
general trend toward relaxation in
credit conditions the country over. The
belief was expressed. however, that it
did not necessarily follow that the New
York Reserve Bank would follow the
action Of the Boston bank, since condi-
tions N the two districts were differ
nt,4 Wv I ,lo.,
banks were still heavy borrowers at
the Federal Reserve Bank. Until con-
siderable further reduction in such
borrowings on rediscount operations
had been effected it was held that
reduction in rates in this district was
not likely to be made.
There is no doubt at ALL" said
leading banker, "that conditions in the
credit market are steadily improving
Recovery in the textile industry of New
England has probably held matters in
possible. liquidation of bank loans to
an extent that has taken considerable
of the pressure of rediscounting off the
Federal Reserve Bank of Boston. In
the New York district there has also
been Improvement in recent months,
but ii is a question whether the stu
alton has relaxed enough to warrant a
reduction in the discount rate of the
local bank. 1t has been my under
standing that the Federal Reserve
Board is opposed to any change in the
New York rate for a time at least, it
being held that to reduce rates here
might bring a, renewal of inhationary
tendencies"
Campaign Began in 1919
The Federal Reserve Board under
bank loans in November, 1919, when
the first advance in discount rates was
announced. Afterward three other up
ward revlslons were made, finally estab-
llshing the per cent rates in the
principal Federal Reserve districts
early last year. In the New York dis
trlct the rediscount rate was marked
up from to per cent last May, and
1t is still maintained on that basis.
Inc Boston rate was advanced SINH
larly the following month.
Recent statements of the individual
Reserve banks and for the system as a
whole have disclosed steady tendency
OF late toward u reduction in member
bank rediscounts, indicating that the
banks were finding it possible. as loans
TO customers were liquitlated, to pay
OIL borrowings at the Reserve institu-
tlons. At the same time an enormous
influx of gold from abroad has taken
place, strengthening the base of the
credit structure greatly and making
tor more comfortable credit situation
all around. In the year ended April 8
the Federal Reserve system has in
creased its gold reserves from 81 ,o57.-
100000 to 264.O1O,OOO, largely
through importations of the metal.
During the same period rediscounts of
the system, representing borrowings by
member banks, have fallen from $2,S67,-
$4,000 to $2,154, 1884, 600.