Reserve Rate Cut

Apparently one of the chief ambitions of the New York Reserve Bank is to surprise Wall Street. The character of its actions is usually forecasted in the financial centre correctly enough, 'but no one can ever tell ahead of time when they will occur. Usually changes in the rediscount rate are made Wednesday, yet Aug. 6 came and went without developments. Then the next day the Bank quite unexpectedly cut its rediscount rate from 3 1/2% to 3%.

The new rate is more in line with the open market rate on acceptances of 2 to 1 7/8%, and call money at 2. It has also been surmised that the new rate indicated that the Bank sought to expend its loans to earn more money, and that it indicated that the Reserve authorities did not expect higher money rates this Fall to any considerable extent. This latter conjecture is important if true; a sudden rise in money rates would not only prove a real shock to security traders, but interrupt much foreign and domestic financing, including perhaps several railroad mergers now under discussion.

At present New York's rediscount rate at 3%, is the lowest in any of the world's money markets. This will serve, in the long run, not only to repel foreign capital from this country, but to send our own capital to the more profitable foreign money markets. America's career as a genuine international centre of finance has begun.