ASIAN policymakers should keep a cool head and avoid the temptation of loosening monetary policy to soothe market jitters over the upheaval on Wall Street, said the chief economist of the Asian Development Bank (ADB).

Such a move, warned Mr Ifzal Ali, would backfire by leading to a period of low growth and higher inflation.

That, he added, would be a stark contrast to the high growth and low inflation of the past decade that made Asia's emerging economies the fastest growing in the world.

Mr Ifzal's warning came as regional policymakers tried to calm financial markets to prevent the banking crisis in the United States from freezing their own financial systems.

The region's central banks flooded their markets with nearly US$27 billion (S$38.8 billion) yesterday, following the US Federal Reserve's injection of US$70 billion into the US money market, which seized up after the collapse of investment bank Lehman Brothers.

"Decision-makers have to keep a cool head and not get cold feet," Mr Ifzal said after ADB released its latest regional economic forecasts.

Asia's developing economies should expand by 7.5 per cent this year, a slowdown from 9 per cent last year, said ADB.

Mr Ifzal said Asia's policymakers should use the slowdown to carry out structural reforms that will do away with ad-hoc policy decisions and will ensure transparency and continuity in government policy, so that long-term investments will keep flowing into the region.

"This has become particularly important because over the next three to four years, the Middle Eastern countries will have more than US$2 trillion to invest." -Reuters