Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-03-22
FURTHER NTERESTIl
CUTS HELDL|KELY
Money Has Become Cheap in
All Banking Centers
of World.
By JOHN F. sINCLAIR.

Special Dispatch to The Star. Y
NEW YORK, March 22.-Few peo-
pie expected the Bank of England to
reduce its discount rate from to az
per cent on Thursday. But it did, and
thereby met the Federal Reserve Bank
Of New York'S rate for the second time
in two weeks. J2
Money is cheap all over the world.
The principal central bank rates now
stand as follows: sH1
England, Switzerland, Holland, BEL
GUM and the Federal Reserve Bank
of New York, ga per cent; France, s.
per cent, the cheapest rate. Nearly all
the other reserve and central banks
OF foreign nations vary from 4 to Az
per cent.
More Cuts Likely.
Will New York again lower its rate
from 3l2 to 8 per cent? Will this be
followed by England and other ma
tons? It looks that way now. Some
even believe that several central bank
rates will get down as low as 2 per
cent.
Naturally, the average reader says:
II am paying per cent for my
money-who is borrowing this money
at and 4 per cent?"
The answer is that this interest is
what banks pay for their rediScounts--
that is, for the money which they
borrow at wholesale from the central
banks of issue. Many of them borrow
at per cent and loan at per cent.
But this spread is narrowing now.
and per cent from their customers
six months ago are receiving to 5lz
per cent today.
Call money rates have been around 2
per cent this week, whereas year ago
they were 10 per cent.
Commercial paper rates are now 1 to
Az per cent, whereas they were from
So to per cent last year.
Rates on so to 80 day acceptances
are now from "a to 21a per cent COM
pared with 5la per cent last year.
Now, what do these cheaper rates
signify? Certainly one thing stands out
In the picture: Bonds-the seasoned
active support during the next few
It almost invariably follows that bond
prices rise as interest rates decline.
Money Is Plentiful.
The Federal Reserve member banks
have more money idle now than they
have had for months. They are ex-
pected to be heavy purchasers of invest
ment bonds during the next year. So
will the Federal Reserve Bank itself buy
heavily for its investments account, as
its rediseountS are lighter now than
they have been in years.
In the last statement which the Fed
eral Reserve Bank made this week bills
discounted for member banks have
fallen to the lowest level in Is years
since 1917.
Last week the total amount redis-
counted in the IL Federal Reserve Banks
was $3.50, 600, 900. This week it is $685.
634, 600, hardly enough to pay expenses.
The week of July 10, 1929, was the
peak period in the Federal Reserve for
rediscounts in recent years. Then this
item rose to $l,153, 100000. This seems
figure, but In the year 1920, the year of
the last big imitation, rediscounts
reached the total of $4,000, 000, 900, or
about II times the total today.
The total gold holdings against Fed
eral Reserve note issues and demand
deposits combined have reached cas-
per. cent, against S08 per cent last
week.
The Federal Reserve never was in a
stronger technical position than it Is
today.
McGarrah Statement.
The recent statement of G. w. Nc
Garrah, former chairman of the Fed
eral Reserve Bank of New York and
now president of the new Bank for In
ternational Settlements, that the direc-
tors OF the Federal Reserve Bank of
New York voted an increase in the re-
discount rate from to per cent for
a number of weeks, from February to
May of 1929, when the stock market
was SIZZLING, only to be checkmated by
the Federal Reserve Board, which re-
fused to sanction the increase, throws
some new and interesting light on Fed
eral Reserve policy.
II the New York Federal Reserve
Bank, in the center of stock market ac-
tivitieS, voted to increase the rediscount
rate in order to hold down speculation
in stocks, why did the Federal Reserve
Board prevent such action?
(Copyright 1880. by North American News
paper Alliance.)