LAWSON CALLS INTERVENTION PROOF OF STABILITY GOAL
The scale of foreign exchange intervention
the Bank of England has carried out recently is clear proof of
Britain's determination to stabilise exchange rates as agreed
between the Group of Seven industrialised countries in Paris in
February, Chancellor of the Exchequer Nigel Lawson said.
    Saying he was "content" with sterling's current value, Lawson
told reporters he wanted "to maintain the exchange rate
stability we have all signed up for." He declined to say if he
favoured a rise or a fall from present sterling levels.
 May currency reserves, out today, showed a record 4.8 billion
stg rise, pointing to massive currency intervention.
    In April, reserves rose a hefty 2.9 billion stg.
    Pointing to the reserves data, Lawson said, "We have been
playing a very full part ourselves" in meeting our commitments
toward exchange rate stability as agreed in Paris.
    "We wish to see it (stability) continuing," he added.
    Asked which techniques were available to preserve
stability, Lawson said both central bank intervention and
interest rate changes could be used to tackle "the market
pressures there are from time to time."
    "Interest rate stability is not an objective in that
sense...Rates have to be moved up and down at times," he added.
    Lawson said he expected intervention to be "sterilised" by
draining excess sterling liquidity from the market through new
issues of government securities and foreign currency sales,
when the market allowed.
    This would limit the inflationary impact of intervention,
he said.
    "Sterilisation will be dictated by market tactics...Not
necessarily in the month in which intervention occurs," Lawson
said. "I am confident that we can sterilise on this scale."
 REUTER
