MercoPress. South Atlantic News Agency

IMF warns about oil, but still optimistic.

IMF Managing Director Rodrigo Rato warned this week about the risks of high oil prices for global growth but said inflationary pressures in the main economies have not appeared.

"Governments must be vigilant with the second round of high oil prices ?which can be harmful for the world economy", said Mr. Rato following his return from a visit to Asian countries.

"So far, we see no clear signals of inflationary pressures in the leading economies. Nevertheless we're closely monitoring the situation and believe that monetary policy must also be followed closely", indicated Mr. Rato who confirmed his optimism about global expansion of "4,6% or more" in 2004.

Mr. Rato praised central banks for their prudent management but also insisted that with solid growth countries should try and solve misbalances and budget deficits if "we want to avoid currency volatility".

Regarding Japan, Mr. Rato said the country's central bank should follow on with its policy of ending deflation. However given Japan's unexpected strong recovery and deflation markets are speculating about the bank's policy of pumping money to keep liquidity and interest rates at zero.

The Japanese central bank anticipated no changes will take place until structural consumer prices begin climbing above zero.

In support of the bank Mr. Rato said "deflationary pressures are now far weaker but there's still a risk of deflation".

He also praised Japanese Prime Minister Junichiro Koizumi for the country's strong expansion of almost 4% in 2004 after years of recession.

Regarding China Mr. Rato recommended deceleration policies to help cool the economy and a sustained long term expansion.

Mr. Rato finally indicated he saw no risks for Asian central banks which have massive holdings of US dollars as international reserves.