PARIS G-6 MEET SET NO TARGETS - LEIGH-PEMBERTON
Bank of England Governor Robin
Leigh-Pemberton said the Paris pact agreed between six leading
industrialised nations set no nominal exchange rate targets.
    Leigh-Pemberton said in oral evidence to a select committee
that "we did not swap numbers - we reached an understanding" on
how to cooperate towards stabilizing currencies at around their
current levels.
    He said the accord had brought Britain into a form of joint
currency float - but one which let it still purse an
independent monetary policy. "I would concede that, since the
Louvre Accord, we are acting as if we are in something,"
Leigh-Pemberton said.
    "The Louvre and Plaza accords show there is a very effective
role for the (Group of) seven central banks to operate together"
towards stabilising exchange rates," Leigh-Pemberton said.
    He did not mention this week's intervention by central
banks to support the dollar, after markets decided to test the
accord.
     Leigh-Pemberton said that "the effectiveness of this
(cooperation) is actually larger than many of us had thought in
the pre-Plaza days" before September 1985.
    He did not indicate what exchange rate levels were broadly
sought by the six nations, and noted that "we are more effective
in our agreement if we can leave the markets guessing."
    He did not indicate what exchange rate levels were broadly
sought by the six nations, and noted that "we are more effective
in our agreement if we can leave the markets guessing."
    Leigh-Pemberton said that, in principle, the Bank of
England favoured full EMS membership for sterling, provided
such a move did not endanger U.K. Anti-inflation monetary
policy. Asked whether he wanted to see U.K. Interest rates
lower, he said "the two half point cuts (this month in banks'
base lending rates) have been appropriate up until now."
    Leigh-Pemberton said he preferred a "cautious step-by-step
approach" to reducing short term interest rates, not least
because "we have a potential problem with inflation."
    Underlying U.K. Inflation was currently around 4.0 pct, "one
of the highest" among industrialised nations, he added.
    Leigh-Pemberton said the Bank of England had not wanted
base rates to fall before the unveiling of the 1987/88 budget
on March 17, but he said pressure from financial markets for
such a move had proved irresistible. Base rates are now at 10
pct.
    Regarding sterling's relationship with oil, Leigh-Pemberton
said that the pound could be seen being undervalued overall.
    He said the current oil price of some 18 dlrs a barrel
might suggest a level of 74 on the Bank of England's sterling
index, when compared with the index's level before oil prices
dropped from around the 30 dlr level. The index, base 1975,
closed here today at 72.1, unchanged from the previous close.
 Reuter
