Daily Kennebec journal. [microfilm reel] (Augusta, Me.) 1870-1975, 1923-02-26
REDISCOUNT RATE
Continues from e.oe On,

where the Significance Of the ,,o,,A z
was O matter Of wide discussion.
opinion on the point was diver
gent. In some quarters, the view ~ y
ned That the reserve banks intended
10 serve notice that credit resources
are not to be expended in speculative
enterprises but are to be preserved
Tor the usual commercial purposes.
Others maintained that the two
banks had taken their action In order
10 bring their rates in line with those
IN other districts and so prevent an
undue demand on their resources.
sun third view was that the
change was merely q belated stem to
rcctify what some consider an abb
normal situation; that is. a position
IN which official discount rates are
below those prevailing In the open
market instead Of being above, as Is
usually the case with the rates of a
central bank Of re-discount, those
who took this attitude set up the
claim that the present relation be-
tween Federal Reserve rates and the
market sprang up under was condi-
tons when the prime consideration
was to assist the treasury in floating
its huge liberty loans; and that
peace-time conditions call for q DIFF.
ferent policy.
In any event, 1t seems clear that
the Official action followed the mark
ct rather than anticipated It. Money
rates have been showing a distinctly
flrmer tendency for some months, as
Is quite natural when the concurrent
improvement in business conditions
Is taken into consideration. Thus
the best grades Of commercial paper
eligible for re-discount at the Fed
eral Reserve bank which fell as low
as four per cent at New York in 1922,
lately have been ruling at IA per
cent. Only a few weeks ago the
market was 4 IL and 4 ga per
cent affair, with the best names goo
ing at 1-2. Consequently the rise in
the official rate followed a period Of
further Tightening in the open mark
ct. 1t also brought slight additional
firming in the latter, the commercial
per cent range. The other money
markets also made a slight response
to the exchange.
AS has been stated. the effect on
speculative operations was slight.
Some hesitation was apparent in the
stock market during the first hour
after the news was known, but tho
reactions were relatively small and
were soon wiped out. Bonds gave
ground somewhat, but cotton prices
continued to soar. Many skeptical
traders in this commodity appear to
have abandoned their resistance to
the upward movement Of prices, be-
ing Influenced by firmness in the
southern spot markets, the strong
statistical position and the impressive
consumption figures. Be that as 1t
may, operations for the rise held the
ascendcncy and the principal futures
came close to the 80 cent mark.
Grain prices did not fare SO well.
! May wheat receding to about $1.1S.
export demand remaining light.
Industrial news continued to be OF
! highly favorable character. The
steel industry is maintaining the
best rate of activity that 1t can at
tain and the tendency Is still toward
a slight increase in operations. De-
mand continues strong and prices
have risen further. The building In
dustry apparently is going ahead at
full speed, with little attention to
higher costs and the other leading
consumers of steel continue to bid
ffc- deliveries. Railroad car loadings
still exceed all records for this sea-
son Of the year and increased public
borrowings by the carriers coincide
with generous orders for new equip
ment and testify to an intention to
put the roads in condition to meet
Unprecedented demands for transport
| tation.