If the world's finance ministers and central banks were cheerleaders at a football game, they would be shouting: ``Hold that line.'' Gathered here for the joint annual meeting of the International Monetary Fund (IMF) and the World Bank, they are trying to keep the United States dollar from plunging in value too fast.
They are also attempting to maintain the present strategy for dealing with the trillion-dollar third-world debt crisis.
Some important central bankers suspect the dollar will eventually have to drop further on the foreign exchange markets to discourage US imports and encourage exports, thereby reducing the massive American trade deficit. However, neither these officials nor others want a rapid decline. They are concerned it could be disruptive, stepping up inflation in the US and possibly prompting an economic slowdown in Western Europe or Japan.
Thus the Interim Committee, a 22-nation policymaking group of the IMF, noted ``the importance of stable exchange market conditions.''
Similarly the Group of Seven (the US, Japan, West Germany, France, United Kingdom, Italy, and Canada) at a meeting Saturday reaffirmed ``that currencies are within ranges broadly consistent with underlying economic fundamentals. They recommitted themselves to continue to cooperate closely to foster the stability of exchange rates around current levels.''
The language was almost identical with that used by the seven at a meeting at the Louvre in Paris last February. Since then, the countries' central banks have spent an estimated $70 billion in foreign exchange markets to keep the dollar within the broad levels set in Paris.
Maintaining their recent success in stabilizing the dollar's value on foreign exchange markets may not be easy. The volume of trading on these markets is so huge that the efforts of central bankers to hold the line can be quickly overwhelmed should investors, speculators, and businessmen decide the dollar is headed down.
Japan assured the other six major industrial democracies that the Bank of Japan's move to curb commercial bank lending last week was not the start of a significant tightening of Japanese monetary policy. The money markets in the US were concerned that higher Japanese interest rates would necessitate higher American interest rates.