Word: rediscounts
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When the New York Reserve Bank raised its rediscount rate from 3 to 3 1/2 % (TiME, Mar. 9), financial London at once showed something nearly akin to excitement. If the pound sterling is to be put back on a gold basis shortly, gold shipments to the U. S. must be prevented; and the easiest way of doing this is to keep London interest rates higher than those in Manhattan. This, of course, tends to attract capital from the U. S. to the British center, and so support the exchange rate for sterling with U. S. dollars...
...once 'the Bank of England appeared in the London open money market as a borrower, and succeeded in driving up the market rates for funds. On the following Thursday, when the Bank's directors met, the "Old Lady of Threadneedle Street" raised her rediscount rate from 4 to 5%. Obviously the move was occasioned by the earlier action of the New York Reserve Bank, and designed to make London a more profitable centre for lenders than is Manhattan...
Interest during the past week was shifted from the security and commodity to the money market, through the rise in the N. Y. Reserve Bank rediscount rate (see below) from...
Undoubtedly the principal events of the past week in the world of business was the raising of the rediscount rate of the N. Y. Federal Reserve Bank from 3 to 3½%. The rate had not been changed since Aug. 8, 1924, when it was lowered from 3½ to 3%. Considerable conjecture arose as to the cause for raising the rate, and whether it indicated a move to halt speculation in the stockmarket. Most editorial writers decided to the contrary −a position which the bank's own statement confirms. The New York Bank rate...
...When the news of the change arrived in London, the Bank of England at once began to purchase bills in the open market, with the result that market-money rates rose. London financial writers at once took this to mean that the Bank of England would soon raise its rediscount rate from 4 to 5%, in order to keep money rates in London above those in Manhattan...