Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-01-12
LONDON BANK RATE
REDUCTION ASKED
Financial Circles Disappoint-
ed at Failure of Governors
to Cheaper Money.
BY LEONARD ]. REID,

Associate Editor OF the London Economist
Special Cable Dispatch to The Star
LONDON, January 1.-THE end of
the week was signalized by surprise
and disappointment at the ultra-con-
sentative attitude of the Bank of Eng
land. London is asking If the cheap
money needed to stir the dry financial
bones will eventuate, after all, before
the restrictive influence Of the proba-
bility of heavy increase in the budget
and taxation becomes acute.
It is considered here that the New
York Reserve rate could be reduced
without risk of damage to any sound
American interest, thus facilitating the
lowering of the Bank of England rate
But even in the absence of this as
sistance, the general feeling in COM
mercial and money market circles Is
that Gov. Norman is not justified in
maintaining the per cent rate when
Paris and Berlin are believed to be
anxious to effect parallel reductions
and when the necessity of stimulating
the sluggish trade by the psychology
Of easy credit is so great.
Wholesale Prices Drop.
British wholesale prices have fallen
6 per cent since last July. The cor
rectton of this trend is desirable on
all grounds. The argument which Is
understood to be influencing the bank
directorate is that frequent changes of
the bank rate are Objectionable. This
Is not accepted by progressive banking
circles, which would prefer a maximum
OF elasticity in the official rate and
nave no objection to a quick rise in the
improbable event that the Az per cent
rate would cause an eff1ux of foreign
balances from London.
The city is now frankly puzzled in
ltS EFFORTS to forecast the Bank of Eng
lands decision next week, since the fac
tors IN favor OF reduction are equally
strong as they were Thursday, when
they were overruled. In the meantime.
the market rate, practically per cent
below the ofdcial rate, represents an
anomalous position, rendering dealing
dif1icult. But it is incapable of rectifi-
cation by this market while the foreign
demand for sterling bills is undated.
During the week business on the stock
exchange showed perplexing cross cur
rents, but an undoubted improvement
OF sentiment with the broadening of
most markets, which frequently caught
professionals unprepared The chief
bullish influence. the monetary outlook,
was not decisively dampened by an alb
sence OF change in the rate on Thurs
day.
Trend to Investment.
Initiative on the speculative side came
originally from Paris, where it is believed
the recent influx of gold is at length
having an effect on financial activity.
French purchases of Kafirs, though
dwindling later in the week, encouraged
modest buying of Rhodesians, while
signs of more stable psychology in the
New York market caused London to
buy internationals.
British domestic purchases, however,
were directed toward investment rather
than speculation. Gilt-edged shares
were conspicuously firm and many
bonds were higher, thus duplicating the
experience of New York. The demand
for ordinary shares Is conferred, first,
on the big banks, whose maintenance of
profits, despite difficulties and increased
bad debts in 1929, Is well regarded,
and, second, on companies In groups
where prices are low after the depres-
sions. such as iron, steel and textiles.
The general opinion is that the next
few weeks will see attention mainly
devoted to high-grade stocks, as the
return of confidence encourages the
placing of the fairly large sums that
have accumulated awaiting investment,
while there will be only temporary
fiutters on the speculative side.
HAIRY Settlement.
There is satisfaction at the terms of
the HAIRY settlement on the eve of q
definite conclusion, as they involve no
loss to the outside public and no fall
ures on the stock exchange.
(Copyright, lssoD