Rates Leap-Frog an Interest 'War': Heavy Loan Demand Opposite ...
All across the country, interest rates are climbing ÛÓ in many cases to record highs. In response to the classic law of supply and demand, lenders including banks and others who are strapped for funds, are offering more and more inducements to those with money to save.</br></br>Thus, in a stiff competitive fight for deposits, major banks have begun to pay 4% per cent on special savings certificates, and Treasury officials yesterday had word of a few paying as much as 514 per cent for certain large deposits.</br></br>Typically, savings and loan associations in the East have boosted their dividend rates from 4V4 to 4V4 per cent. And just this week, in an attempt to keep within hailing distance of the competition, the Government decided to hike the interest it pays on savings bonds from 33A to a probable 4 per cent.</br></br>Some observers, noting the tremendousÛÓand largely unexpectedÛÓdemand for loans have openly wondered whether or not the Federal Reserve will again step in to raise the discount rate, the level at which member banks can borrow from the Fed.</br></br>They note that the 4Vi per cent discount rate set only Dec. 3 is once again less than ÐÊthe prevailing Treasury bill rate ÛÓ which theoretically means that member banks can borrow from the Fed, and turn a profit simply by buying Treasury securities.