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'Slowdown in world economic growth inevitable'

The International Monetary Fund also welcomes the US Federal Reserve's decision to cut its main interest rate as "appropriate and helpful".

business Updated: Jan 23, 2008 08:43 IST

A significant slowdown in world economic growth appears "inevitable", the International Monetary Fund has said, as it welcomed the US Federal Reserve's decision to cut its main interest rate as "appropriate and helpful".

"A significant 2008 slowing in the global expansion already appears inevitable, and downside risks still predominate," Masood Ahmed, Director of External Relations of The Fund, said in a Statement.

"The United States has been most affected by recent economic and financial developments. Thus, Wednesday's 75-basis point reduction in the Federal funds rate was appropriate and helpful," he said.

With global markets experiencing a meltdown amid fears of a US recession, the Federal Reserve had on Tuesday cut its key short-term interest rate by 75 basis points in a move aimed at steadying the world's biggest economy.

Ahmed asked the Federal Reserve to apply targeted and timely fiscal measures to boost near-term demand.

"Financial market prices are consistent at present with expectations of significant future rate declines. In any case, there is no doubt that the Federal Reserve will respond with alacrity to new fundamental and financial developments. In addition, targeted and timely fiscal measures could provide near-term support for demand," he said.