Finance ministers of the world's leading industrial nations yesterday effectively scuttled, at least for the time being, the idea of a new global conference on international monetary reform.
In a communique following a two-day meeting on worldwide monetary and debt issues, the Interim Committee of the International Monetary Fund made clear that changes in the present exchange rate system do not have priority on the international economic problem list, and specifically rejected a "target zone" system proposed by France. Instead, they again endorsed continuation of the flexible exchange rate system, but suggested it might be improved.
Essentially, the Interim Committee broke no new ground during its meeting here this week. There also was no decision to move now, in a concerted way, to lower interest rates. In its communique, the committee welcomed the recent slide in interest rates and expressed the hope that further declines in inflation "would allow this process to continue."
Specifically, West Germany rejected a prod from other governments to lead the way to lower rates. British Chancellor of the Exchequer Nigel Lawson speculated that in any event, "over the course of this year, the trend of worldwide interest rates will be lower."
Under a "target-zone" system, major nations would agree to establish ranges in which exchange rates would fluctuate, and to take actions to keep their rates from moving outside the zones. "There was no support for target zones," Dutch Finance Minister and Interim Committee Chairman H. Onno Ruding told a press conference.
On another controversial issue, the IMF policy board, while noting continuing serious economic problems in the Third World, once again rejected the demands of the poor nations for a new issue of Special Drawing Rights, the IMF paper currency. The United States, West Germany, Britain and other nations successfully opposed a new issue of SDRs, which can be converted into hard cash by the nations receiving them.
The communique urged that, despite concern over currency volatility and misalignments, governments should stick with floating exchange rates. It suggested that "if better exchange-rate performance" is to be achieved, it would depend on the ability of member countries to follow "sound and mutually consistent" policies.
The communique omitted all mention of a new monetary conference. Treasury Secretary James A. Baker III had been asked by President Reagan to study the possibility of convening such a conference.
Baker had told the committee Wednesday that the United States recommends further studies of ways to improve the international monetary system to maximize economic growth and maintain an open system of trade and international payments. But he made no mention of target zones, and did not specifically bring up the idea of the monetary conference.
According to a West German official, Baker yesterday said the United States opposes target zones, when the question was put to him by West German Finance Minister Gerhard Stoltenberg during the Interim Committee discussion period.
But a Treasury official, asked to confirm that report, said it was a "misinterpretation" of what Baker had said. According to the Treasury official, Baker had only said, while rebutting "some negative comments" on target zones, that "this is not to say that we support target zones." The United States' position, according to the Treasury official, is that "we are neither for nor against target zones."
But the mood of the meeting clearly was that there is no point or urgency in discussing target zones or other monetary reform issues, in view of the sharp decline of the dollar.
"The present constellation of exchange rates is better than it was prior to the Hotel Plaza [meeting of the Group of Five in New York last Sept. 22], although no one argues that things are right, and should be locked in where they are," Lawson told reporters.
French central bank head Michel Camdessus was alone among the major nations supporting monetary reform.
In a sense, the discussions this week constituted a holding action prior to next month's economic summit in Tokyo. They merely ratified recent economic policy actions -- notably the coordinated moves to depress the dollar and interest rates that had been undertaken at the September 1985 and January 1986 meetings of the finance ministers of the five leading industrial nations.
The most substantive decision by the Interim Committee was to ask the executive board of the IMF to study ways in which its multilateral surveillance procedure might be strengthened, specifically through using a set of "objective indicators" by which the IMF could rate a country's economic performance.