IMF: 'market crisis manageable'

Source: Stock Market Digital

Date :12/08/2007 12:32:22

The International Monetary Fund has moved to restore calm on financial markets after two days of turmoil.

Despite continuing falls in share prices around the world, the IMF said the current crisis was "manageable",

Over the past two days central banks in several countries have pumped billions of dollars into banking systems in an effort to keep money flowing.

Billions of dollars, pounds and euros have been wiped off share values, hitting businesses and individual investors.

The markets have been driven down by fears that US mortgage market problems could prompt a worldwide credit crunch.

On Friday, New York's main Dow Jones share index ended 31.14 points - or 0.2 percent - lower at 13,239.59, while London's FTSE 100 index had its worst day in more than four years, down 3.7 percent.

Earlier, the French, German and Asian indexes had also closed significantly lower.

In a statement issued late on Friday, the IMF said: "We continue to believe that the systemic consequences of the reassessment of credit risk that is taking place will be manageable.

"The fundamentals supporting strong global growth remain in place."

Global stock markets have been affected by worries over financial institutions' exposure to bad credit in the US sub-prime mortgage market.

Sub-prime lenders offer loans to consumers with a poor credit history.

As a result of these problems, banks have suddenly started charging significantly more

for the money they lend to each other as they look to limit their risks.

For their part, central banks around the world have moved to prop up markets by lending money to banks who might be in trouble.

The European Central Bank injected cash into the money market for a second day, as did other central banks worldwide.

The ECB said its move was to "assure orderly conditions in the euro money markets".

The US Federal Reserve intervened twice during the day, adding $38 billion to the banking system, the largest amount since it intervened in the days following the attacks on New York and Washington on 11 September, 2001.

In a further effort to boost liquidity, Japan's central bank had earlier pumped one trillion yen ($8.5 billion; £4.2 billion) into the financial system

August 12 2007