Treasury Secretary W. Michael Blumenthal said late yesterday that "a series of continuing actions" dealing with dollar crisis would be announced "as decisions are reached over the next few weeks."
Blumenthal's statement closely followed reports that the dollar had dropped sharply in the New York market immediately after President Carter's afternoon press conference. Carter, in response to a question, had failed to indicate any new approach to problems created by depreciation of the dollar.
The President emphasized the underlying strength of the American economy, and again put major stress on the need for Congress to do something about energy legislation. Rightly or wrongly, currency markets were looking for something more specific from the President, although no action had been promised so quickly.
"I thought he said nothing, and he said it badly," one New York banker observed. "The market was looking for something, and we don't have anything. The best indication of reaction is that the dollar is down sharply."
In late and probably very thin trading, the dollar dropped to 185 yen, after having been as high as 188. Against the deutschemark, the dollar retreated to Wednesday's close of 1.965, after having been as high as 1.99. Exchange markets are likely to be uncertain until the scope of Carter's new plans are made public and assessed.
Blumenthal's statement, telephoned around to newspaper offices and financial ticker services within 30 minutes after the end of the Press conference, was cast in terms of an announcement Carter had asked Blumenthal to make.
The most specific thing Carter had said at his press conference was that he would not foreclose the option of acting "unilaterally" to reduce oil imports if Congress fails to act to limit energy consumption. He mentioned as possibilities oil import quotas or extra oil import fees. He also reiterated administration optimism voiced in the past few days about a possible decline in the U.S. trade deficit.
In earler testimony before the Senate Finance Committee. Blumenthal had said he and Federal Reserve Chairman G. William Miller would respond "shortly" to President Carter's request for actions to deal with the dollar.
Financial markets seemed convinced that the Fed would follow the course set by former Chairman Arthur F. Burns last December, and raise the discount rate as a psychological boost for the dollar. But the Fed took no such action yesterday. The discount rate is now 7.25 percent, and the expectation is that if it is raised as a signal of concern for the dollar, it will be moved up sharply, to 7.75 percent.
Blumenthal, in response to Sen. Harry F. Byrd Jr. (Ind.-Va). came close to agreeing with the premise of the Senator's question that the decline of the dollar represents a lack of confidence in the way that the administration is handling the economy.
The secretary said the two main long-term causes of the dollar's slide are an "unacceptable" rate of inflation and inaction on the energy bill. The international community, Blumenthal said, expects to see the U.S. Government "follow proper policies" in dealing with inflation and "the imbalance in our trade and current account."
He didn't offer specific guidance on what the administration might now propose, but as Carter had done on Wednesday, Blumenthal characterized market action as "disorderly." He cited "a lot of speculation," and added that "we are determined to do all we can in co-operation with other countries to counteract those factors."
Some took this as a hint that intervention might be stepped up in some way, or that the resources available for intervention might be bolstered.
The U.S. for example, could add to the resources it listed last January 4 for intervening in the markets by drawing down some of its reserves held at the International Monetary Fund. It could also sell additional gold to acquire hard currencies for intervention.
But responsible officials stressed that the administration will stick to its previously announced position that it will not try to intervene on a massive scale, with the intention of "pegging" a rate or a zone below which the dollar should not fall.
Like most experts in the financial markets, administration officials think that the dollar is now "oversold," and with a little encouragement, could rebound.
Blumenthal offers a fairly optimistic forecast on inflation, predicting a dip from the first half 10.4 per cent rat to 6.0-6.5 per cent in the second half. he also said that for 1979 as a whole the inflation rate would be below 1978. "But that double digit (first half) rate has been planted in the minds of some people," he lamented.
In a related development, Sen. Jacob Javits (R-N.Y.) raised Carter's Wednesday statement, but called for "concrete action to deal with the causes of the dollar's instability," even if it results in "a mild recession" for the next two years.