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IMF: US interest rate cut “helpful”

The US Federal Reserve’s 75-basis point reduction in its main interest rate is “appropriate and helpful,” the International Monetary Fund said on Tuesday.

“The United States has been most affected by recent economic and financial developments. Thus, today’s 75-basis point reduction in the Federal funds rate was appropriate and helpful,” IMF spokesman Masood Ahmed said in a statement. The Fed made the emergency dive to 3.50% before markets opened Tuesday morning, citing “a weakening of the economic outlook and increasing downside risks to growth” in justifying the biggest one-day move by the central bank in recent memory. “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,” said Ahmed.

Meanwhile, he said a “significant 2008 slowing” in the global economic growth already appeared inevitable, adding that “targeted and timely” fiscal measures could help boost demand. Wall Street and most European markets saw a partial rebound Tuesday after growing worries about a US recession triggered sharp declines on Asian and European stock markets Monday. (people.com.cn)