CANBERRA, June 14: The current battering of global stock markets is an expected correction resulting from a reappraisal of risk, International Monetary Fund chief Rodrigo de Rato said on Wednesday.

Rato, managing director of the Washington-based IMF, said markets had plunged as investors reviewed a previously benign attitude towards risk.

“We see that the markets have recently taken a new appraisal of risk and we believe that was probably a correction that was due,” Rato told reporters in Canberra.

“Now we are moving towards a more neutral stance in monetary policy which is healthy because it is more sustainable.”

World stock markets took a beating on Tuesday, with New York’s Dow Jones index losing all of its gains of 2006, Tokyo share prices posting their biggest fall since the September 11, 2001 attacks on the United States, and stock markets in London, Paris and Frankfurt slumping.

Rato, in Canberra for meetings with Prime Minister John Howard and members of the Reserve Bank of Australia, said markets were facing the challenge of rising interest rates.

“At the same time there are also some signs of inflationary pressures picking up,” he said. “Not too dramatic a situation but nevertheless picking up.”

Meanwhile, high oil prices and limited spare capacity in many major economies, including the United States, were impacting the market.—AFP