Central Bankers Warn U.S. Against Weakening Dollar

BASEL, Switzerland — Top central bankers told the United States and other industrial nations today that decisive steps are needed to keep the global economy out of trouble and that it would be dangerous if the dollar became any weaker.

The central bankers are attending the annual meeting of the Bank for International Settlements, the central banks’ own central bank.

The dollar, driven down in the last two years by a sluggish U.S. economy and America’s huge trade deficit, particularly concerned International Settlements President Jean Godeaux, who told the meeting, “There are . . . a number of reasons why a further depreciation of the dollar would have major drawbacks.”

It would lead to inflationary pressures in the United States and mean further difficulties for exporters in West Germany and Japan, whose strong currencies make their goods more expensive.

If any further fall of the dollar were disorderly, that would destabilize financial markets, said Godeaux, who is also president of the Belgian National Bank.

International Settlements’ annual report, meanwhile, said that industrial nations have made progress in reducing inflation, but the threat of new price rises has not been banished.

The report also challenged governments to take decisive steps and referred specifically to the United States, which in the view of its allies has failed to deal with an astronomical budget deficit.