RESERVE BANK RATE

Wairarapa Times-Age, 19 November 1938, Page 7

RESERVE BANK RATE

DOUBLED AS FROM TODAY. BEARING ON FINANCIAL POSITION. .The Reserve Bank of New’ Zealand announces that the minimum rate for discounting or rediscounting bills will be increased to 4 per cent per annum as from today. The Reserve Bank’s discount rate has stood at 2 per cent since June 29, 1936, so that the alteration now to be made represents a doubling of the rate. The Reserve Bank of New Zealand is required by statute to publish the rate at which it is prepared to discount or rediscount eligible bills of exchange. When the bank opened for business in August. 1934, it announced that its minimum rate for discounting or rediscounting bills was 4 per cent per annum. On July 29, 1935, the rate was reduced to 3? per cent, and on March 2, 1936, it was lowered to 2i per cent. The rate was reduced on June 29, 1936, to 2 per cent per annum, at which level it has since remained. In view of the fact that the weekly statements of the Reserve Bank since its inception have shown no figures indicating business in the discounting of bills the announcement of the increase in the discount rate from 2 per cent to 4 per cent would appear to have nd special significance. During the four years the bank has been in operation item 9 on the assets side of its weekly statement —discounts, (a) commercial and agricultural bills, and (b) Treasury and local body bills —has remained blank. Nevertheless, in view of the overseas trade position and other factors in the economic situation, the bank’s doubling of its discount rate in one movement must be regarded, at least, as a warning signal. In his address at the first and only ordinary general meeting of the Reserve Bank of New Zealand, held on June 7, 1935, the governor, Mr Leslie Lefeaux, made the following statement: “The discount rate is not of great significance pending the development of a bill market, but it serves to indicate the bank’s view as to the level at which the general public should be able to obtain financial accommodation against first-class bills. Moreover, the bank would always take eligbile bills at its published rate from those with whom it is prepared to do business. This rate should not, of course, be confused with the trading banks’ overdraft rate, the latter normally being slightly the higher.” The trading banks’ minimum overdraft rate is 4.J per cent, at which level it has stood since November 30, 1934.