The finance ministers of the world's five leading industrial nations yesterday suggested the time may be ripe for lower interest rates, but stopped short of any formal effort to orchestrate such a move by coordinating the actions of their respective central banks.
U.S. Treasury officials, reporting on their weekend meeting in London with officials from Great Britain, West Germany, France and Japan, said that while there was no formal agreement to lower interest rates, "our central bankers agreed to maintain close contact on this."
They also said that the five countries, known as the Group of Five, had agreed that continuing good prospects for low inflation over the next 12 months had created "a favorable environment for reduced interest rates."
The policy agreement on interest rates appeared to be a compromise between the general desire for lower interest rates and the political and technical difficulties of coordinating monetary policy through central banks, some of which are independent of government authority.
Financial markets are likely to take the group's conclusion on interest rates as evidence that political forces in the five nations are pressuring their central banks to lower interest rates.
A senior Treasury official spoke to reporters about the meeting aboard a commercial flight from London to Washington on which Treasury Secretary James A. Baker III, Deputy Secretary Richard Darman and Assistant Secretary David C. Mulford were traveling.
Federal Reserve Chairman Paul A. Volcker also was part of the U.S. delegation at the London meeting.
Lower interest rates, according to most experts, would accelerate economic activity by making it cheaper to borrow and invest; reduce inflationary pressures; encourage better exchange-rate relationships; and reduce the carrying costs on much of the Third World debt.
The senior Treasury official also made clear that while the Group of Five reported it was satisfied with the downward progress of the dollar "to date," the United States would like to see the dollar go lower, provided that happens "over a period of time, in a stable, gradual way, in response to market forces."
"There is a desire, obviously, for lower [interest] rates, consistent with other important considerations, such as inflation, relevant exchange rates, and the like," the Treasury official said.
The weekend agreement by the industrialized nations consisted of a terse, three-sentence statement, which simply acknowledged the fact of the meeting, plus a four-point explanatory summary that was designed to be used orally by each of the five governments at separate background briefings.
In general, the Treasury official characterized the London meeting as "satisfactory," and said he was pleased with the outcome and tone of the discussions. But he acknowledged that the United States continues to feel that world economic recovery would go more smoothly if some of "our trading partners help the United States carry the load in terms of world economic growth."
He added there would be "no finger-pointing," but this was an obvious reference to U.S. efforts -- that continued in London -- to encourage greater economic expansion in Japan and West Germany.
The Treasury official declined to speak on the record because of a decision by the central bankers and finance ministers in London to revert to a "lower profile" for their group. This is part of an effort to enhance the status of the Group of Ten industrial countries. Canada and Italy, which belong to the Group of Ten, and other smaller European industrial countries complain that they have been excluded from the international economic decision-making process.
The Group of Ten now actually has 11 members. In addition to the five major industrialized nations, Canada and Italy, the group includes Belgium, The Netherlands, Sweden and Switzerland.
This became an active issue after the Group of Five's highly publicized meeting last Sept. 22 in New York, at which the five nations launched a coordinated program to devalue the dollar.
The senior Treasury official said that an effort would be made to give the Group of Ten a higher profile at the time of the spring meeting of the International Monetary Fund and the World Bank in Washington. Officials said the Group of Five would continue to meet, however.
The Treasury official said that monetary questions, including interest rates, was one of four "areas" discussed at the London meeting. The other three were:
*Exchange rates. He said all those at the meeting agreed that the roughly 10 percent decline in the dollar since Sept. 22 had been satisfactory "to date" and "should not be allowed to be reversed." While the U.S. officials want to see the dollar ease somewhat more, with no specific targets in mind, the other nations have made clear that for the moment, they are not anxious to see a further appreciation of their own currencies.
*Fiscal policy and budgets. They discussed global economic performance since September and agreed that the most important event was the passage of the Gramm-Rudman-Hollings budget-balancing act "with the full support of the Reagan administration." They "welcomed the prospect of successful continuing reductions in the U.S. fiscal deficit."
*Third World debt. Members of the group "welcomed the progress to date on the implementation of the principles" outlined by Baker in Seoul last October for boosting the commercial and official cash flow to 15 key debtor countries.
The U.S. official also said that the problem of finding a satisfactory replacement for World Bank President A. W. Clausen, who will retire mid-year, was discussed. He also put to rest a rumor that IMF Managing Director Jacques de Larosiere was under consideration for the World Bank job.