Looser Money

There were plenty of signs last week that tight money is beginning to loosen. The Treasury Department's costs for floating its 91-day bills edged down for the second week, stood at an average 3.528%. Furthermore, interest rates on bankers' acceptances, i.e., a form of short-term commercial loans, have dropped in the past month from 4% to 3.75%.

The demand for long-term money--which a few months ago had raced far ahead of supply--was being pinched off by high interest rates. Businessmen still wanted to expand, but they were so hard-pressed to find the funds--and so reluctant to pay the steep interest--that they were shelving many marginal projects.

The Federal Reserve Board reported that, in September's last week business loans fell by $203 million. In the key New York area, loans last week also bucked the usual seasonal uptrend, declining by $15 million; in the same week last year, they rose by $89 million. For the entire third quarter, commercial and industrial loans decreased by $37 million v. an $857 million gain during the same period of 1956.

The tight-money policy was also reducing the pressure on prices. The Commerce Department's daily wholesale-price index of sensitive commodities slid to 85-3% of the 1947-49 average, the lowest since 1953, and wholesale food prices dropped sharply for the third straight week.

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