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By Glenn Somerville and David Lawder
WASHINGTON, Feb 15 (Reuters) - The United States hopes the Group of 20 meeting in Paris this weekend will begin coming to grips with how to handle rapid flows of capital that stoke inflation and cause currency rate disruptions, a Treasury official said on Tuesday.
"We need a better framework for addressing volatility in capital inflows," a U.S. Treasury Department official who requested anonymity, told reporters.
Surges in capital flows "can complicate macroeconomic management, contribute to credit booms and busts and risks and reversals," the official said.
Finance ministers from G20 rich and developing countries meet in Paris on Friday and Saturday, hoping to advance an agenda that aims to identify causes of global economic imbalances and eventually devise policy remedies to fix them.
There are strains among the G20 members, however, over issues ranging from revamping the global monetary system to setting out a menu of measures to gauge whether a particular country is contributing to imbalances.
The U.S. official said progress in devising so-called "indicative guidelines" for making such a determination was likely to be limited in Paris but made clear the United States still sees inflexible currencies, like China's, as an issue.
"Belatedly, G20 members need to free up exchange rates to facilitate adjustment," the official said. "For the global adjustment process to work all major economies must allow their currencies to adjust in line with market forces, or risk imposing excess burdens on others."
In response to questions, the official repeated that the Obama administration considers China's yuan, also called the renminbi, to be undervalued but suggested it was not the only inflexible currency.
The official said that when some countries maintain an undervalued currency, it makes it hard for others like Brazil that have floating currencies but are dealing with large and inflationary capital inflows to apply traditional policy remedies like higher interest rates.