The head of the International Monetary Fund on Thursday praised a Federal Reserve decision to cut a key interest rate and said global powers must do more to overhaul the financial system and halt a spreading economic crisis.
IMF Managing Director Michel Camdessus, briefing reporters on what could turn out to be pivotal annual meetings of the 182-nation lending organization, rejected suggestions that the IMF had mishandled the global currency crisis.But he said the world's seven richest countries must push for stronger growth to offset steep recessions in many Asian nations and Russia. He endorsed the Fed's decision to cut a key U.S. interest rate by a quarter-point Tuesday and suggested that European monetary authorities should take similar steps.
Asked why stock markets, particularly in the United States, have reacted so negatively to the Fed rate cut, Camdessus said he believed confidence will soon be restored if financial leaders show resolve during the upcoming discussions.
"If during the meeting, leaders take clear decisions and the G-7 takes the lead for growth to help countries out of crisis, then the markets will see this and not overreact," Camdessus said.
Stocks fell further on Wall Street Thursday, extending a global selling spree. The Dow Jones industrial average, which tumbled 237.90 points Wednesday, fell an additional 150.10 to 7,692.52 at midday.
The Dow's 12.4 percent slide in the third quarter, which ended Wednesday, was its worst quarterly performance for the Dow in eight years. The blue-chip average began the day down 65.63 points from where it began this year and almost 1,500 points, or 16 percent, from its July 17 record of 9,337.97.
Stock prices plunged in Asia, with Tokyo shares falling 1.6 percent to a new 12-year low, and shares fell sharply in Europe, where Germany's central bank left interest rates unchanged.
Blue chips in London sank 2.4 percent to new lows for the year, while the key index in Frankfurt, Germany, was down 5.5 percent.
Camdessus said the G-7 discussions, which will get under way in earnest Saturday with a meeting of finance ministers and central bank presidents, should focus on ways to improve timely release of key economic data so the IMF and investors can better spot troubles and a review of propsals to upgrade banking regulation.
"If we want to make the world a better place then we have to go for transparency, go for strengthening of financial and banking systems and the orderly integration of emerging markets into the world economy," Camdessus said.
The IMF took the lead in assembling more than $100 billion in bailout packages for Thailand, Indonesia, South Korea and Russia but has watched as the Asian nations have plunged into steeper recessions.
And in August, a botched currency devaluation and partial default on foreign loans by Russia sparked a worldwide plunge in stock markets.
In addition to overhauling the architecture of the global financial system, finance officials will spend time in behind-the-scenes efforts to put together a rescue package of perhaps $30 billion to bolster Brazil.