Business & Finance: Boston Reserve Bank Rate

Bankers have for some time been predicting slightly higher money rates for this winter. The first official recognition of this coming trend was supplied by the quite unexpected action of the Boston Reserve Bank in moving its rediscount rate up from 3½% to 4%. It is now expected that the New York Reserve Bank will soon follow suit with a similar rate advance, and that the ten other Reserve Banks will shortly swing into line by a similar action.

Two features of the Boston rate-action have puzzled bankers, particularly in New York. They wonder why the Boston rather than the New York Bank should in this case be the first institution to start the upward movement. Formerly almost all general changes in Reserve rates have been initiated by the New York Bank as representative of the money-centre of the country. Also, there is much curiosity over the question as to just what local conditions in Boston, if any, should have made it advisable to start the rate-advance.

Meanwhile, a higher rate for the Bank of England is predicted very soon. Such a change would permit the New York Federal Reserve Bank to lift its rate to 4% without causing a flow of gold from Britain to this country—a most undesirable development in the British effort to hold sterling exchange at par. In England the Boston rate-move is thought to foreshadow an advance by the Bank of England.