Speaking in Davos, the head of the International Monetary Fund, Dominique Strauss-Kahn said: 'Whatever the answer is on a recession, what is clear is there will be a serious (US) slowdown and it needs a serious response.'

The head of the IMF, which usually encourages reductions in public spending, indicated that there was room for fiscal loosening in some big countries and interest rate cuts.

Central bank monetary policies and interest rates alone are not enough to address persistent global economic problems, the International Monetary Fund Managing Director Dominique Strauss-Kahn said on Saturday.

Speaking to reporters after a meeting at the annual World Economic Forum, Mr Strauss-Kahn said economic and financial globalisation required multilateral coordination of economic policies under the umbrella of bodies such as the IMF.

Cooperation of the kind orchestrated by the world's central banks last month to ease tensions in the bank-to-bank lending markets were just one aspect of the much-needed coordination of policies, he said.

'We are facing global imbalances and the subprime crisis is only part of it. We are facing also currency imbalances, surpluses rising in some countries...all those imbalances have to be addressed,' the IMF chief said.

'The problem cannot only be addressed by monetary policy, even tough monetary policy is very important. We have to look at the whole picture.'

On interest rates, he said that an expected economic slowdown would lead to falls in inflation which would allow some central banks to lower borrowing costs to boost the economy.

The US Federal Reserve has slashed interest rates aggressively, but the European Central Bank is resisting pressure from some European politicians to act because it remains concerned about inflation.

'There will probably by even more room (to lower rates) in the coming weeks or the coming months depending on the price of commodities and on the decreasing demand,' Strauss-Kahn said.

He also said the IMF would issue economic forecasts next week that would show emerging countries doing 'rather well' despite the problems faced by the US economy.

He also called for a global solution to the current economic problems, which originated in the US housing market but have spread to infect the global financial system and financial markets.

Losses by banks which invested in complicated securities backed by high-risk US mortgages have led to a credit crunch in which bank lending has been restricted.

Fear of losses and a lack of transparency about the extent of the problems have led to highly volatile trading on world stock markets.

'All this shows that we need more multilateral regulation,' Mr Strauss-Kahn said.

Mr Strauss-Kahn took up the IMF top job last year and one of his first priorities is to re-focus the fund's activities away from developing country bailouts towards providing a more effective early warning system for the global economy. -- REUTERS, AFP