WASHINGTON (AP) – Finance ministers and central bankers should remain vigilant to ensure the smooth functioning of financial markets that have been jarred by a global credit crisis, the International Monetary Fund’s policy-making committee said Saturday.

The group also said in a statement that monetary policy of member governments should focus on achieving price stability while keeping a close eye on inflation in the light of rising food and oil prices, among other factors.

Problems in the global economy came to a boil when credit markets froze on Aug. 9 as fear overwhelmed many investors. Troubles that began in the market for subprime mortgages in the U.S. spread to many other kinds of debt on international markets.

In an attempt to soothe jittery markets, the IMF statement urged “continued vigilance to maintain well-functioning financial markets.”

The ministers said they would continue “to work together to analyze the nature of the disturbances and consider lessons to be learned and actions needed to prevent further crises.”

“The turbulence has revealed a number of problems that may be deeper than the specific episode that triggered the tensions,” said Italian Economy Minister Tommaso Padoa-Schioppa, the new head of the IMF’s policy-making committee.

The head of the IMF, Spain’s Rodrigo de Rato, was optimistic despite the recent concerns about the credit market.

“The global economy is expanding from a solid foundation,” he said.

The IMF statement said global economic growth was moderating amid disturbances in financial markets, but financial growth in countries with fast-growing economies and “strong fundamentals” continue to support the world economy.

Ministers said the financial innovation that led to the packaging of securities based on subprime mortgages in the U.S., “while having contributed to enhanced risk diversification and improved market efficiency, have also created some new challenges that need to be properly addressed.”

Padoa-Schioppa said some of the institutions involved in the packaging needed to be monitored.

“There is a clear need for supervisory audits even for the great financial institutions that create these instruments, to understand better what their creations are doing out on the market. This is clearly a reason for concern,” he said.

The IMF statement recognized the growing importance of sovereign wealth funds – huge pools of money controlled by governments – in international financial markets.

“While recognizing their positive role in enhancing market liquidity and financial resource allocation,” the statement said, “the committee welcomes the work by the IMF to analyze issues for investors and recipients of such flows, including a dialogue on identifying best practices.”

The IMF took up the issue because of growing concern that countries with these funds, ranging from China to Kuwait, might buy up companies, banks and real estate in the West.

The ministers paid tribute to de Rato, who is leaving at the end of the month, and said they looked forward to working with his successor, France’s Dominique Strauss-Kahn.

“This is a sad day for the IMF but should be a very satisfying day for you,” Padoa-Schioppa told de Rato at a news conference.

Based in Washington, the 185-member organization, which helps out countries in financial crisis and makes loans to poor nations, has been criticized for not allowing countries with fast-growing economies more of a say in IMF decisions.

Under an informal practice dating back to the founding of the IMF and its sister institution the World Bank 63 years ago, an American heads the bank and a European leads the fund, a process critics of the two institutions say is outmoded.

De Rato said the institution needed to update its governance. The ministers said they had made some progress working on a formula to increase the representation of fast-growing economies in IMF decision-making, but advocacy groups said the reform program was “going nowhere.”

“The Europeans refuse to give up their stronghold on the institution and the United States is not really interested in the poorest countries having a bigger say at the table,” said Elizabeth Stuart, senior policy adviser to Oxfam International, an aid group and frequent IMF critic.

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Associated Press writer Desmond Butler contributed to this report.

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On the Net:

World Bank: www.worldbank.org

International Monetary Fund: www.imf.org

AP-ES-10-20-07 1819EDT