- Title: FRANCE: BANK OF FRANCE RAISES OVERNIGHT LENDING RATES
- Date: 9th October 1995
- Summary: PARIS, FRANCE (OCTOBER 9, 1995) (RTV - ACCESS ALL) 1. SV JOINT DIRECTOR GENERAL OF ACPR TRADING HOUSE OLIVIER MIRAT SPEAKING (ENGLISH) / GV/SV CUTAWAYS OF DEALING ROOM (8 SHOTS) 2.06 SEQUENCE 1 TRANSCRIPT: MIRAT: "THE FRANC'S RISE WAS SLIGHTLY STRONGER THAN EXPECTED, BUT OF COURSE THE SITUATION IS NOT VERY GOOD. THE FRENCH AUTHORITIES WILL HAVE TO EXPLAIN THAT THEIR FIGHT AGAINST THE DEFICIT IS A SUCCESS AND THAT THEY WILL REACH MAASTRICHT CRITERIA AS SOON AS POSSIBLE. IT'S EASY TO SAY THAT THE SITUATION WILL CONTINUE FOR SOME TIME. AND EVEN AFTER SOME CONSOLIDATION WE WILL SEE FURTHER WEAKNESSES OF THE FRENCH FRANC. MY GUESS IS THAT WE WILL NOT SEE A STRONG FRENCH FRANC JUST CONTINUING LIKE THIS UP TO NEXT YEAR. WE WILL SEE FURTHER WEAKNESSES AND SOME STRENGTHS. NO, I DON'T THINK IT'S THE END OF FRANC FORT POLICY, AND I THINK THAT THE GOVERNMENT AND THE GOVERNOR OF BANC DE FRANCE WILL CONTINUES HIS POLICY. BECAUSE IF THE FRENCH FRANC WEAKENS TOO MUCH, IT WILL BE THE SIGN OF THE WEAKNESSES OF THE GOVERNMENT. SO I DON'T SEE ANY POSSIBILITY FOR THE FRENCH AUTHORITIES - BANC DE FRANCE OR THE GOVERNMENT - TO CHANGE THE POLICY NOW." Initials Script is copyright Reuters Limited. All rights reserved.
- Embargoed: 24th October 1995 12:00
- Location: PARIS, FRANCE
- Country: France
- Reuters ID: LVA6BHE2D4JUG19NU2U02AEM5XZZ
- Story Text: The Bank of France raised it's overnight lending rates on Monday (October 9) in a bid to defend the franc against recent sharp falls in the foreign exchange markets.
The Bank boosted its 24-hour lending rate to 7.25 percent from 6.15, effectively propping it up after repeated selling on the foreign exchanges Pressure on the franc, which began in earnest last week, eased after the franc hit a low of 3.5300 against the German mark. It had recouped two centimes by late morning.
The Joint director general of ACPR trading house, Olivier Mirat, said although on Monday morning the franc was stronger than expected, its situation was not good and traders were looking to the French government to explain apparent policy confusion.
Mirat said over the next months the French franc would see further weaknesses and the future remained very uncertain.
French stocks reacted with disappointment to the rate rise with investors seeing a strong franc policy as bad for equities.
Foreign investors are concerned over the government's ability to trim its budget deficit, its falling popularity and an investigation into whether Prime Minister Alain Juppe broke the law by leasing a city-owned home while he was Paris's finance chief.
Mirat warned the government against ending its 'Franc Fort' policy saying "if the French Franc weakens too much, this will show up weaknesses within the government." The French, key architects of plans for a common Europan currency, are obliged under European Monetary Union convergence rules to keep the Franc within a narrow trading range of the Deutchmark.
The Bank's move follows an intervention last Friday when it suspended a five-to-10 day lending facility and opened a 24-hour lending window at an unchanged 6.15 percent. This morning's move raised that lending rate to 7.25 percent.
But the share market fell as the stock exchange showed dismay over the rate rise, traders said. Higher interest rates could knock economic growth and companies' profits.
A statement from the G7 countries -- Britain, Canada, France, Germany, Italy, Japan and the United States -- said they would work to reduce imbalances and cooperate in exchange markets, which was seen as positive for the dollar.
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