by wisconsin_cur » Mon 22 Oct 2007, 14:23:28
IMF Chief warns dollar may suffer 'abrupt fall'
$this->bbcode_second_pass_quote('', 'T')he head of the International Monetary Fund, Rodrigo Rato, warned Monday there are risks of an "abrupt fall" in the dollar, linked to a loss of confidence in dollar assets.
"There are risks that an abrupt fall in the dollar could either be triggered by, or itself trigger, a loss of confidence in dollar assets," Rato told the IMF board of governors.
He also appeared to suggest that Europe could take steps to temper the strong appreciation of the euro.
"There is a risk that exchange rate appreciation in countries with flexible exchange rates -- including the euro area -- could hurt their growth prospects, and that in these circumstances protectionist pressures could worsen," he said on the final day of the annual meetings of the IMF and the World Bank.
The outgoing IMF managing director spoke as the European single currency hit a new high of 1.4347 dollars and global equity markets tumbled amid growing fears a US housing-related credit crunch could pitch the world's biggest economy into recession.
Fed Official: Bank will protect economy$this->bbcode_second_pass_quote('', 'W')ASHINGTON (AP) - The Federal Reserve will do whatever is necessary to prevent damage to the economy from the credit crunch that has gripped Wall Street, a Fed official said Monday, warning it will take time for financial markets to fully recover from the strains.
Fed Governor Randall Kroszner's remarks came as fears about the credit crunch and a painful housing slump have gripped investors in recent months, causing stocks to nosedrive. Wall Street took another sharp plunge—366 points—on Friday. The Dow Jones industrials were down again in trading Monday, though not as sharply as Friday.
"The Federal Reserve will continue to monitor developments in financial markets and act as needed to support the effective functioning of these markets and to foster sustainable economic growth and price stability," Kroszner said in a speech here to the Institute of International Bankers.
It is the same pledge that Federal Reserve Chairman Ben Bernanke and other central bank colleagues have been making in the past months. That is, to keep the economy growing and inflation under control.
Some economists believe the Fed will lower an important interest rate at the end of a two-day meeting next Wednesday, to help bolster economic activity. But others, citing the economy's resiliency and worries about an inflation flareup, think the Fed will leave rates alone. Oil prices, which had surged to record highs in recent weeks, have eased a bit but are still hovering above $86 a barrel.