In the space of 24 hours last week, the German Bundesbank raised interest rates and the Federal Reserve Board moved in the opposite direction.

The reasons for these contradictory economic policies were clear. Facing recession, the Bush administration and the Federal Reserve are pursuing lower interest rates to help restore growth. The Germans, enjoying a boom and facing rising budgets to pay unification costs, are acting to choke off a perceived inflationary threat.

At a meeting three weeks ago in New York, just ahead of those moves, the Group of Seven leading industrial nations said that currency rates were about at the right levels, and it was prepared to respond in appropriate fashion to maintain stability.

But financial markets, as they watched the U.S. dollar slide in response to the interest rate changes despite intervention, wondered whether the G-7 could deliver on its promise to help maintain stability, or whether the divergent underlying trends spelled a weakening of the economic coordination process.

For the latter half of the 1980s, world financial markets had been accustomed to a strong effort by the G-7 (and its predecessor, the G-5) to achieve stable relationships among their currencies through coordinated intervention, when necessary.

"But the G-7 no longer has enough muscle in the market to set any sort of exchange rate bands or zones," according to Robert Hormats, vice president of the investment firm Goldman Sachs & Co. and a former State Department official. "Therefore, the G-7's market credibility is much less than it was two or three years ago." Some go even further, dismissing the G-7 as irrelevant.

German central bank President Karl Otto Poehl and U.S Treasury Undersecretary David C. Mulford, two of the key G-7 policy makers, disagree. In separate interviews, each contended that given the dramatic events of the last several months -- involving war, recession, and gyrations in oil prices -- exchange rates have remained remarkably stable.

In a conversation from Bundesbank headquarters in Frankfurt, Poehl said that the exchange markets "reacted in a very calm way" to the interest rate changes, "although we intervened a lot" to accomplish that. Mulford added: "When you look back at this period {some months hence}, there is a strong probability that you will see that despite all of the elements of uncertainty and tension, they were managed impressively by the G-7."

Poehl stressed that the present divergence in underlying economic conditions among the major G-7 members "makes coordination and cooperation more urgent than ever before. The question is, what do you coordinate?

"Some people think you have to have stability of exchange rates at all costs. That is not our concept of coordination, nor is it the concept of others. We have very different economic situations in the United States and Germany. So coordination doesn't mean and cannot mean that we all have to do the same things at the same time. It is more important that we pursue prudent policies that lead, finally, to a stable system," Poehl said.

"What happened last week is not a contradiction of the cooperative process. It would be very bad if coordination prevented any country from doing what is necessary for stability at home. First of all, we have to keep our own house in order -- all of us."

Poehl made clear that Germany felt compelled to boost interest rates despite incurring the wrath of its European partners -- which, incidentally, he thinks is misplaced because "they stand to benefit from the German expansion."

Others are less sure than Mulford and Poehl that coordination is working. There are increasing global economic tensions, outside the G-7 process, relating to trade and contributions to pay for the gulf war. Critics see the possibility that strains will continue and deepen if the interest rate spread widens between the United States and Germany.

Treasury Secretary Nicholas F. Brady, who is pressing the Fed to lower interest rates still more to battle recession, took pains to emphasize in congressional testimony last week that "we don't have a policy of a weak dollar." The Treasury argument is that lower interest rates don't automatically result in a cheaper dollar.

C. Fred Bergsten, director of the Institute for International Economics, supports the Mulford view that the G-7 can remain effective, even if the dollar -- as Bergsten expects -- goes down. Nonetheless, the perception among many sophisticated traders and analysts is that the best the G-7 can do for now is to slow the pace of the depreciation.

As Poehl's remarks implied, techniques of coordination may have to be more subtle, and perhaps less ambitious, at a juncture when key countries pursue what each believes to be the requirements of its own national policy.

Count Otto Lambsdorff, head of the Free Democratic Party and a former German economics minister, said central bankers today "pay more attention to domestic strategy and less to creating a regime of exchange rates that must be defended against the market."

The principal concern expressed by financial markets, as they contemplate the lessened influence of the G-7, is the prospect of a global recession, touched off by high European interest rates, beyond the power of any international force to moderate it. Many Europeans feel that Germany should have raised taxes to squash an inflationary potential before boosting interest rates. But Chancellor Helmut Kohl didn't mention a tax boost until he could blame it on the $5.5 billion extra contribution Germany is making toward the costs of the gulf war.

The bottom line is that the G-7 may have to take a back seat for a time. Mulford suggests that the G-7 process, given Brady's preferred ways of operating, "may be less visible, but that doesn't mean the process has atrophied." Nonetheless, today's perception of the G-7 -- among financial market players it tries to influence -- is one of weaker leadership.

The coordination process worked best when it was managed by former Treasury Secretary James A. Baker III, a visible and influential wheeler-dealer, with the help of other strong finance ministers. Markets acknowledge that because of diverging economic trends, today's G-7 managers have a tougher assignment than they did under Baker. But collectively, they look less fearsome.