PARIS MEET AGREED NOT TO PUBLISH BANDS - LAWSON
U.K. Chancellor of the Exchequer Nigel
Lawson said the meeting of six major industrial nations in
Paris last month agreed not to publish any bands in connection
with their pact to stabilise currencies.
    Questioned by a parliamentary select committee about why
the participating countries had not announced any bands, Lawson
replied, "we all agreed it would be much more sensible not to."
When asked whether that meant an informal joint currency float
with set ranges was arranged in Paris, Lawson said "I do not
want to reveal the precise nature of the agreement, so as not
to make it easy for" speculation against the accord.
    Lawson said the Paris accord presumed that individual
countries would take corrective action if their currency began
reacting significantly to domestic macroeconomic factors.
    But if such movements were due to extraneous factors,
Lawson said the other pact countries would come to its aid
through concerted intervention on the foreign exchanges.
    "It is clear that both Germany and Japan are having
difficulty adjusting to their very large exchange rate
appreciations and making their economies more domestically
oriented, just as it is taking time for the United States to
make its own economy more export oriented," Lawson said.
    In his oral evidence to Parliament's Select Treasury
Committee, Lawson repeated that he was happy with the pound's
current level, adding that "It is an objective ... To try to
keep it around that level."
    He said the perception of sterling on foreign exchanges had
changed since the steep drop in oil prices, largely because the
pound had weathered that period so successfully. "There has been
a reassessment of sterling's fundamentals," Lawson said.  He
disagreed with what he termed "the grossly exaggerated claim"
that real U.K. Interest rates were much higher than those of
other major industrialsed countries.
    Using as a reference the key three-month sterling interbank
rate as quoted in London, Lawson said Britain now had a real
interest rate level of 5.75 pct - the same as Japan did and
only a 0.75 percentaage point above the Group of Five average.
    Lawson confirmed that "over the medium and longer term, the
government's objective is zero inflation."
    He said the government's intention of its PSBR constant at
1.0 pct of GDP "is the modern equivalent of the balanced budget
doctrine."  He added that "to allow the debt/GDP ratio to remain
constant on anything other than zero inflation basis is simply
a recipe for accelerating inflation."
 Reuter
