IMF Chief: Fed Did The Right Thing

The Federal Reserve made the right decision in cutting a key interest rate earlier this week, the head of the International Monetary Fund (IMF) said Thursday. But he said global powers must now 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 badly handled 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 praised the Fed's decision to cut a key U.S. interest rate by a quarter-point on 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, especially if financial leaders show resolve in their discussions over the next week.

"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.

Written by Harry Dunphy