A "significant" slowing in the pace of 2008 global economic growth appears inevitable, the International Monetary Fund said on Tuesday, also warning that restoring world financial markets was going to be a complex and protracted task.
IMF spokesman, Masood Ahmed, said the US Federal Reserve's 75 basis point cut in the federal funds interest rate on Tuesday -- the largest cut in the benchmark rate in more than 23 years -- was "appropriate and helpful."
The Fed's move followed deep losses on world stock markets as investors worried about a possible US recession and whether the slowing U.S. economy would drag the rest of the world with it.
"The volatile weakening experienced in many equity markets during the past few days has underscored the burden that the current financial market turmoil represents for the global growth outlook," Ahmed said in a statement.
"Thus, a significant 2008 slowing in the global expansion already appears inevitable, and downside risks still predominate," he added.
Ahmed said the Fed should apply "targeted and timely" fiscal measures to boost demand.
"Financial market prices are consistent at present with expectations of significant future rate declines," he said.
"In any case, there is no doubt that the Federal Reserve will respond with alacrity to new fundamental and financial developments," he said. "In addition, targeted and timely fiscal measures could provide near-term support for demand."
The statement came ahead of a more thorough update scheduled for Friday at 1600 GMT, or 11 am Washington time, on the health of the global economy and financial markets.
In its last global economic outlook in October, the IMF said world growth was expected to slow to 4.8 percent in 2008 and recently revised its 2007 estimate to 4.7 percent after new data on China and India.
The IMF said on January 10 it does not predict a recession in the United States but has cautioned that risks of one had increased.
Still, the IMF has remained somewhat upbeat about global growth prospects mainly because of still robust growth in emerging economies. (Reuters)
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