Federal Reserve Board Chairman Paul A. Volcker yesterday told a congressional committee that despite criticism of high interest rates by European political leaders, the key finance ministers and central bankers with whom he deals are supportive "of the basic intent or thrust of our policies."
Volcker later conveyed the same message to President Reagan in a 30-minute briefing session at the White House, attended by all of the principal economic advisers to the president.
Economic Council Chairman Murray Weidenbaum told reporters after the Reagan-Volcker session that the administration believes interest rates will eventually come down, and that "monetary and fiscal restraint" are the keys.
Volcker's comments -- supported by similar observations from State and Treasury department officials -- suggest that the U.S. side now thinks European complaints about American economic policy were aimed largely at home consumption.
Volcker cited the following comment put to him by "one wise foreign official," which he said captures the real evaluation of American policy in Europe:
"'You cannot expect us to be enthusiastic about the effects of your policies; we will all have different opinions about just how you are going about it; but the fact is we have no agreed better alternatives to offer you. We can only wish you success."
Meanwhile, at a White House briefing, Secretary of State Alexander Haig said that the U.S. would take the lead in discussion of East-West issues at the summit, presenting a paper urging all nations attending to follow "a collective economic policy" toward the Soviet Union that would be in line with "political and security" considerations.
East-West issues will be on the summit agenda for the first time, on the U.S. initiative. Although the U.S. does not expect specific agreements, Reagan wants to make sure that Western nations' exports do not contribute to Soviet military strength.
This will be difficult because the Europeans have built up a stronger trading relationship with the Eastern bloc than has the U.S. But State Department officials consider that merely getting the issue addressed at an economic summit is a victory of sorts for the U.S.
Volcker testified before the Joint Economic Committee at the request of the chairman, Rep. Henry S. Reuss (D-Wis.), who has been urging a change in the fiscal-monetary policy "mix" in order to reduce what he calls "murderously high interest rates."
But Volcker, while agreeing with Reuss and many European critics of American policy that the burden placed on the Fed would be reduced if fiscal restraints were stronger, said "it is equally important to recognize that there are no 'quick fixes' available through monetary policy to lower or fine-tune interest rates."
He said repeatedly that the Fed would like to see lower interest rates, and "that will happen" at some undetermined time in the future. It is a "mistaken" view, he emphasized, to think that "we are following a policy deliberately directed at achieving high interest rates and dollar appreciation . . . the Federal Reserve had neither an interest rate nor an exchange rate objective."
In dealing with the claim by foreign officials that the U.S. must be sensitive, in an interdependent world, to the impact its policies have on the performance of other economies, Volcker said the U.S. "should not and cannot assume" responsibility for all economic difficulties being experienced in Europe or elsewhere.
He said that the 20 percent weighted average appreciation of the dollar since December, 1980 against major European and other currencies is not entirely due to U.S. interest rates. He pointed out that the differential on U.S. interest rates compared with other industrial countries' rates had declined about 2.5 points since the end of last year. Even though U.S. short-term interest rates are about 1 percentage point less than the December average, European currency values have continued to decline, he said.