The director of the IMF said today the world's major economies still had scope for further monetary easing if necessary and that he did not expect a global recession.
"In the short term, the economic policies of the larger advanced economies remain broadly supportive, and there is some scope for further monetary easing should that prove necessary," IMF managing director Mr Horst Koehler said at a conference in Athens.
He was speaking three days after the European Central Bank trimmed its benchmark interest rate to 2.50 per cent, its lowest level in four years, in response to a worsening outlook for the euro zone, the world's second biggest economy.
Mr Koehler reiterated that despite current great uncertainty, he did not foresee a global economic downturn.
"Consumers and investors remain cautious, and the economic recovery is weaker than earlier anticipated. But I do not expect a global recession," he said.
Financial markets recently have been showing "a remarkable degree of resilience".
"In the last two years there have been a series of shocks - starting with the financial markets bubble in the US, then September 11th, then corporate scandals in the US and the prospects of a possible war. That's quite a lot. Nevertheless the global economy and the financial sectors have not broken down."
Full confidence is not likely to return while the possibility of a war in Iraq looms, he said.
He said major economies and Europe should do more to support economic growth. The European Central Bank has signalled it stands ready to do more if necessary.
According to G7 sources, the IMF has cut its world economic growth forecast to 3.3 per cent from the 3.7 per cent envisaged in its autumn report last year.