IMF Director Sees Sluggish Economic Recovery

New York, NY, Sept. 4, 2009--International Monetary Fund Managing Director Dominique Strauss-Kahn said he still sees "serious downside risks" to the world financial system and that the recovery will be sluggish and possibly jobless.

"Mounting delinquencies mean banks remain under strain, with developments in the commercial real estate sector of particular concern," Strauss-Kahn said in prepared remarks for the annual Bundesbank lecture in Berlin. "Private securitization markets are still impaired. And households and the financial sector continue to deleverage."

As a result, "policymakers should err on the side of caution as they decide when to exit from their crisis response policies," he said.

He said that while central banks faces challenges on when and how to walk back from loose policy adopted to deal with the crisis - especially in term of "enormous expansion" of their balance sheets -- he doesn't see this as an immediate concern since inflation won't be a threat for some time to come.

Strauss-Kahn also said world financial authorities have much work still to do in terms of protecting against another global financial meltdown in the future.

"The good news is that there is broad-based agreement on the principal lessons of the financial crisis. ... The bad news, however, is that the reform effort is not proceeding as quickly as is necessary," he said.