Fed rate cut helpful but not enough: IMF's Lipsky

WASHINGTON (Reuters) - The IMF's No.2 official said on Tuesday the Federal Reserve's move to cut U.S. rates was helpful but won't on its own restore the smooth functioning of global credit markets.

"There needs to be a comprehensive and broader approach that goes beyond simply the Fed to produce success here," John Lipsky, the International Monetary Fund's first deputy managing director, told CNBC television.

Lipsky said the downturn in the U.S. economy had deepened in recent months and that it looks likely the worst is still to come over the next few quarters.

"Our hope is that a combination of aggressive policy action both here and abroad on the monetary side, the fiscal side and regulatory action will help eventually restore growth, hopefully before the end of 2009," he added.

Lipsky said now was not the time to worry about low rates.

"First let's stop this deleveraging process and restore functionality to the financial system, and eventually return to credit growth. Then, we can worry about restoring more normal conditions," he added.

Lipsky, who is scheduled to make a major policy speech at the Council on Foreign Relations at 8 a.m. EST in New York on Wednesday, said the IMF was encouraging both monetary and fiscal action across major economies to restore growth. In addition, it is providing financial aid to emerging economies hard-hit by the financial market turmoil and weaker global growth.

"Who needs the most help? Frankly, it is the advanced economies that have led the world into this recession; they need to take the action necessary to lead the global economy out of this recession," Lipsky added.

(Reporting by Lesley Wroughton; Editing by Jonathan Oatis)