Interest Rates Regulation

Manawatu Times, Volume 62, Issue 28, 3 February 1937, Page 4

Interest Rates Regulation

The Government is evidently desirous of stabilising depression rates of interest. An Order-in-Council gazetted last week renews that of 1934 wherein interest rates payable by trading companies and building and investment societies is regulated. These rates govern money placed upon deposit with the types of business house listed. For call money the basic rata is 2 per cent., trading firms paying one-half per cent, higher. For longer terms the rates rise by steps to 3£ per cent, at one to two years with business firms paying 4 per cent, for such a term. An effect of these regulations is to prevent competition for deposits of capital by the public. Trading companies, investment companies and building societies may not pay above the prescribed rates. If they cannot obtain the deposits they desire they cannot raise their rates in an attempt to attract the public’s savings. When originally introduced in a time of national emergency the control was understandable. To-day, with recovery at hand, the retention of such regulations does not seem reasonable. That interest rates should remain reasonably low is desirable, but their governance should rest with the Reserve Bank and the Treasury and be effected by monetary policy, not by laws.