Too Early To Declare Market Woe Over: IMF's Lipsky

Source : The Business Times, August 31, 2007

Although market woes were not good news, Mr Lipsky said that strong underlying growth in many economies before the turbulence picked up would provide a crucial cushion

JACKSON HOLE - Financial market turmoil will dent but not derail world growth and it is too soon to declare the problems over, International Monetary Fund (IMF) First Deputy Managing Director John Lipsky said on Thursday.

'Central bank action so far has been appropriate but market turbulence has not fully receded,' Mr Lipsky said in an interview on the sidelines of a gathering of top international central bankers and economists.

The Federal Reserve and European Central Bank have injected billions of dollars and euros into the financial system this month to prevent them from seizing up over fears of contagion from the US sub-prime mortgage market, but it was not over.

'The problems persist. It is far too early to draw a line under the recent events,' Mr Lipsky said.

Many policymakers involved in these decisions were in Jackson Hole for a policy conference hosted by the Federal Reserve Bank of Kansas City, including Fed Chairman Ben Bernanke, members of the Fed's interest rate-setting committee, board members of the ECB and other central banks.

The IMF is still estimating the fallout for world growth and although market woes were not good news, Mr Lipsky said that strong underlying growth in many economies before the turbulence picked up would provide a crucial cushion.

'On the basis of developments so far, it would seem clear that the financial turmoil will exert some dampening on global growth. But given the strong starting point it would seem that growth will remain solid,' he said. -- REUTERS