IMF

•  ROOM TO EASE MONETARY POLICY SHOULD BE EXPLOITED
•  FINANICAL MARKETS HAVE `ENTERED A VICIOUS CYCLE
•  CLEAR NEED FOR ADDITIONAL ECONOMIC STIMULUS
•  GROWTH FORECASTS FOR U.S., EURO ZONE, JAPAN, CHINA
•  ALL G-7 ECONOMIES EXCEPT CANADA TO CONTRACT NEXT YEAR
• IMF REVISED FORECASTS TO WORLD ECONOMIC OUTLOOK
• 2009 US GDP CUT TO -0.7% AND ECB CUT TO -0.5%

The world economy is in a major downturn due to financial shock.  They expect the US to enter recession.  The economic situation is extremely uncertain. 

IMF ECB hikes carry risk. ECB should stay on hold.  Also report that EURO is overvalued by at least 10%.  Exchange rate on strong side relative to its fundaments. 

Inflation should fall but risks are contained versus ECb assessment that risks are to the upside.   

2009 GDP growth 1.2% versus 1.7% in 2008. 

IMF in a report says that they see a 25% chance of a global recession and the US was likely to enter mild recession in 2008

•  WEAKER DOLLAR MAY BOOST INFLATION IN EMERGING MARKETS
• RISKS TO FINANICIAL STABILITY REMAIN ELEVATED
• POTENTIAL ADDED STRESS ON BANK CAPITAL DUE TO FURTHER WRITEDOWNS
• THEY PREDICT U.S. HOUSING, MORTGAGE-RELATED LOSSES OF $565 BLN
• THERE WAS A COLLECTIVE FAILURE TO UNDERSTAND SCOPE OF TURMOIL
• FINANCIAL MODEL FOR STRUCTURED CREDIT APPEARS TO HAVE BEEN FLAWED
• TOTAL LOSSES FROM MARKET TURMOIL MAY REACH $945 BLN

The report suggests that the there are to be more writeoffs as according to Bloomberg banks have written off only 232 billion. 

The IMF today cut the EUROZONE's growth forecast released in January at 1.8% down to LESS THAN 1.3%.  There was really no big reaction in the markets after this release, but this could put some downward pressure on the EUR in the near future...

IMF says it is right for the ECB to keep rates where they are now, but be ready to act on slower growth and slower inflation.

Also, says dollar despite the recent depreciation, still remains 'rather strong'.  Cuts US GDP to 1.5% in 2008 and 1.7% in 2009.

ANALYSIS: Comments should weaken the dollar

• Global growth to 4.1% vs 4.4% prior
• Risks to downside
• USD GDP to 1.5% from 1.9%
• ECU GDP to 1.6% from 2.1%
• Japan GDP to 1.5% from 1.7%
• Emerging markets resislient
• Central Banks need to be flexible to manage liquidity needs
• Challenge to balance growth/inflation
• ECB should stay steady
• Fed policy is working
• US stimulus could be quite helpful

International economic situation is serious.  US slowdown is effecting all countries.  NOt impossible for current crisis to hit emerging countries.

International economic situation is serious