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Oil, food prices could further dampen growth

The International Monetary Fund said it was maintaining its outlook for the world economy for now, but cautioned that higher prices for oil and food could further dampen growth.

"Despite increasing oil prices, the broad contours of the fund's assessment of the global outlook remain unchanged at this stage,” IMF spokesman David Hawley told a regular press briefing.

“Significantly higher oil and commodity prices could have a dampening effect on growth if prices remain at elevated levels,” he added.

He said the ability of banks to raise capital was “reassuring” although a protracted adjustment in financial sector balance sheets is still likely.

The Washington-based institution has already twice cut its growth forecast for the world economy this year - in January and again in April. In its last outlook in April, it warned the US was headed for recession this year and put world growth at 3.7% in 2008.

In October, it had looked for growth of 4.8%, a forecast it lowered to 4.1% in January to try to account for the world's fast-spreading credit turmoil.

Hawley said the IMF would update its forecast again in July. (Reuters)