(Adds further detail from IMFC statement)
WASHINGTON (Thomson Financial) - The global economy may not yet have seen the full effects of the recent financial turbulence and further slowdown may yet be on the cards, the International Monetary Fund's policymaking arm said today.
'Recent disturbances in financial markets in advanced economies are expected to have a moderating effect on growth in the near term, and downside risks to the outlook have increased,' the IMF's International Monetary and Financial Committee said in a joint communique.
On inflation, the IMFC said central banks around the globe 'should focus on achieving price stability while continuing to assess carefully the inflation outlook, taking into account both the inflationary pressures stemming from tight commodity markets and rising oil and food prices, and downside risks to growth.'
The IMFC also called for strong international cooperation on financial stability issues, in the wake of the summer's global financial market turmoil. Specifically, it said risk management of complex structured finance products, liquidity management, off-balance sheet instruments and ratings agencies should all be put under examination and review by both national regulators and international agencies.
The IMF committee did not go as far as the G7 ministers in calling for examination and supervision of sovereign wealth funds (SWFs). It called only for a 'dialogue' on best practices and resisting protectionism.
The SWFs, it said, played a 'positive role in enhancing market liquidity and financial resource allocation.' corbett.daly@thomson.com cbd/dem//wash/ro/ro COPYRIGHT Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.