"It is clear that central banks should be vigilant to inflationary pressures," Rato told a press conference during a meeting of Group of Eight leaders here.

"Central banks are right to act in a pre-emptive manner to contain inflationary pressures," the IMF chief said a day after the European Central Bank raised its key interest rates to 4.0 percent and signalled it might not stop there.

The Bank of England held its rates unchanged at 5.50 percent on Thursday, but experts expect it to raise borrowing costs again in the future.

The Organisation for Economic Cooperation and Development in Paris also recently stressed it was important that the monetary authorities retain their credibility in face of rising energy and food prices and a time when the world economy is in robust health.

IMF chief Rato also said he welcomed the discussion within the G8 on regulation of the trillion-dollar hedge fund industry.

G8 president Germany has put hedge funds on top of its agenda given its concerns that rapid growth in the increasingly powerful sector could destabilise the entire global financial system.

But the world's richest nations -- Britain, Canada, France, Germany, Italy, Japan, the United States and Russia -- have so far spectacularly failed to find a common line on the issue.

The lack of consensus was apparent again in a declaration released on the second day of the three-day summit of G8 leaders in this Baltic Coast resort, where Germany's goals were effectively swept under the carpet.

"I welcome the discussion on subject," Rato said.

"There is a need for transparency and for financial education."