The current battering of global stock markets is an expected correction resulting from a reappraisal of risk, International Monetary Fund chief Rodrigo de Rato said today.
Rato, managing director of the Washington-based IMF, said markets had plunged as investors reviewed a previously benign attitude towards risk. 'Now we are moving towards a more neutral stance in monetary policy which is healthy because it is more sustainable,' he said.
World stock markets took another beating yesterday, with New York's Dow Jones index losing all of its gains of 2006, Tokyo share prices posting their biggest fall since the September 11, 2001 attacks on the US, and stock markets in London, Paris and Frankfurt slumping around 2%. Dublin's ISEQ index lost over 3% to six month lows.
Rato said markets were facing the challenge of rising interest rates. 'At the same time there are also some signs of inflationary pressures picking up,' he said. Meanwhile, high oil prices and limited spare capacity in many major economies, including the US were also impacting the market.
The IMF chief said that the prospects for global growth remained strong, with the IMF forecasting 5% for 2006 and predicting that in 2007 'the world economy will continue performing at a healthy pace'.
