The world's policymakers must strengthen the global recovery, using monetary policy as the first line of defence against weakness, IMF managing director Mr Horst Koehler said today.
"Our most immediate concern must be to strengthen the global economy," Mr Koehler told finance ministers and central bankers of the 184-member International Monetary Fund and World Bank.
"There are clearly a number of risks and uncertainties. But we should beware of undue pessimism. There are still good reasons to expect that the recovery will continue," he said.
Mr Koehler said he believed entrepreneurs would still find new opportunities by ignoring the herd. Policymakers, he added, knew what to do in case of further signs of economic weakness.
"Monetary policy should be the first line of defense, as long as inflation prospects remain subdued," Mr Koehler said.
Advanced economies had a responsibility to strengthen growth, Mr Koehler told the policymakers on the last day of a series of weekend talks between members of the IMF and World Bank.
"We look to the US to set a continued example, and to guard against the re-emergence of fiscal deficits," Mr Koehler said. Europe should stick to its Stability and Growth Pact, which fixes the economic rules for the European Union, notably concerning deficit targets.
The European Commission last week proposed postponing for two years the 2004 target date for lowering countries' public debt ceilings to a maximum three percent of annual economic output.
"We trust that Japan will now move forward with bold reforms of the banking and corporate sectors, and act decisively to end deflation," Mr Koehler said. AFP