WASHINGTON — Treasury Secretary James A. Baker III today proposed the establishment of a global price index of commodities, including gold, and told world financial leaders it could aid as an early warning signal of inflation.
Baker, speaking to the annual meeting of the International Monetary Fund and the World Bank, said that such a "commodity price indicator" could serve as an important "analytical tool" in helping major industrial nations better coordinate their economic policies.
Baker praised recent efforts by the world's seven major industrial democracies to coordinate steps in an effort to help stabilize the dollar.
"It is equally important that the policies resulting from the coordination process not be inflationary," Baker told representatives of 151 nations.
Idea From Venice Summit
"It would be unfortunate if our efforts to foster exchange rate stability among currencies led to stable currency relationships--but in a context of inflationary economic policies that reduced the real value of all currencies," Baker said.
His proposal was designed to be a major refinement of a process endorsed by leaders of the seven industrial nations--the United States, Japan, West Germany, France, Britain, Canada and Italy--at last June's economic summit in Venice.
The process called for increased surveillance of one another's economies through the use of economic indicators such as unemployment, trade balances, and growth.
The use of these indicators were to help policy-makers fine-tune decisions that affect exchange rates--such as interest rates of central banks and direct government intervention on foreign exchange markets.