IMF to say Fed must prepare world for rate hike

The Financial Times quoted the main chapter of an International Monetary Fund report it had obtained as adding that the IMF will urge the European Central Bank to consider cutting interest rates owing to sluggish growth in the 12-nation eurozone.

The IMF's World Economic Outlook, to be published Wednesday, will coincide with testimony by Fed chairman Alan Greenspan on the US economy, the FT report noted.

The fund reportedly suggests in cautious language that "the ground should be prepared for future monetary tightening" given the "bouyant short-term outlook and the need to avoid financial market disruption both domestically and abroad."

As for the eurozone, inflation remained "surprisingly sticky" in spite of weak economic growth, the newspaper quoted the IMF report as saying.

"Inflationary pressures are likely to be restrained by weak domestic demand and the appreciating currency," it nonetheless added.

"Further easing would be appropriate if as a result of these or other factors inflation looked likely to fall below the desirable level."