Rodrigo Rato, the former Spanish economy minister, made his debut today as the new head of the International Monetary Fund warning of the impact of high oil prices on the world economy.
In his first public statements since he was elected yesterday, Rato said that oil prices, which have hit a 14-year high, were an 'essential variable' in the recovery of the world economy and were necessary for avoiding inflation.
Referring to earlier IMF findings, he said 'the fund has calculated that an increase of $5 a barrel over 12 months would have a negative effect of 0.3 percentage points on growth.'
The forecast is based on the IMF's current benchmark oil price of $30 a barrel. Oil prices have been soaring recently amid concerns about security in key Middle East producer countries and stocks in big consumer nations such as the US.
In London today, a barrel of Brent North Sea crude shot up to $36.30 from $35.93. The worrisome spurt has come amid jitters over US gasoline supplies and violence in oil kingpin Saudi Arabia. High oil prices have triggered mounting concern about the sustainability of a global economic rebound after several years in the doldrums.
The IMF officially named Rato, 55, as its new managing director yesterday for a five-year term. He replaced Horst Koehler who resigned to stand as a candidate for the German presidency.
Rato gave no indication that he would break new ground at the IMF, saying that under his leadership: 'Our work will be concentrated on the surveillance of the world economy, working with the global economy and also with the national economies, and also working with the different countries that demand help and programs.'
Rato said the US was enjoying 'strong and sustained growth.' While a recovery was underway in the euro zone, it lagged behind momentum elsewhere.
He was cautious on monetary policy trends, saying: 'Interest rates may change in future, although not in a sudden manner.'
The IMF forecast in a report released last month that US interest rates could start rising in 2004 in response to strong growth. In the euro zone it said that rates might need to be trimmed if the recovery became any weaker.
