West Germany's central bank, resisting U.S. pressure to reduce interest rates, today ruled out lowering its discount rate "for the time being" despite Thursday's rate cut by the Federal Reserve Board.
Government and private banking experts said, however, that West Germany might reduce interest rates by early autumn, particularly if the dollar's value falls substantially on foreign exchange markets.
West Germany's leading financial newspaper, Handelsblatt, today quoted currency experts from the Berliner Bank as saying that West Germany and Japan would consider lowering their interest rates only if there is "an even greater drop of the dollar."
Senior U.S. economic officials have urged West Germany and Japan to lower their interest rates and thus encourage domestic economic growth.
Such a policy would spur world economies generally, U.S. officials have contended.
Cutting rates would stimulate imports into West Germany and Japan while reducing imports from those countries into the United States, thus helping reduce their enormous trade surpluses with the United States.
The U.S. view is that West Germany, with an inflation rate hovering around zero and lackluster economic growth at the start of the year, can afford a little inflation without worrying about overheating its economy.
U.S. officials have urged West Germany to match U.S. interest rate cuts, like the action taken by the Federal Reserve Board Thursday in lowering the U.S. discount rate from 6.5 percent to 6 percent.
But a spokesman for the Bundesbank, or West German central bank, said in a telephone interview that "we see no need for, no use in cutting the discount rate for the time being" from its current level of 3.5 percent.
The Bundesbank remains concerned that an easing of monetary policy at this time could rekindle inflation, said the spokesman, who asked to remain anonymous.
The spokesman also said that German money supply growth was "on track" right now, so no change in credit policy was necessary.
Bundesbank President Karl Otto Poehl signaled in comments Tuesday that West Germany was waiting for other European countries to reduce interest rates before West Germany did so.
The discount rate is the interest charged by the central bank on loans to commercial banks, and is thus the banking system's key underlying interest rate.
The comments by the Bundesbank spokesman today, and by Poehl earlier in the week, appeared to rule out any change in West Germany's discount rate at the next meeting of the central bank's policy-making council next Thursday.
After that meeting, the council will begin its annual summer break, and it is not scheduled to meet again until mid-August.
Government and private financial analysts said the Bundesbank might lower the discount rate in August or September, partly because of the dollar's weakness and partly because of a slowing of the growth rate of the West German money supply.
"The more the dollar goes down, the more pressure there will be for European countries, and especially West Germany, to do something about it," a government banking expert said.
The source also noted that there is "some small range now for a half-point cut in German commercial market interest rates," which would in turn encourage the Bundesbank to lower the discount rate as well.