A draft version of the International Monetary Fund's World Economic Outlook concluded the US economy "remains very weak, certainly close to a possible recession".

The warning comes after the Bank of England on Thursday pumped an extra £5 billion into frozen money markets in a bid to stave off crisis.

Its second such move in three days came as it held talks with the heads of major banks starved of cash in the credit crunch.

The FTSE 100 Index finished nearly 1% lower, with the leading share index down 2.5% overall after four days of volatile trading and the launch of a probe into claims of market abuse.

The Bank's £5 billion extra brought its total funding available to £10.9 billion, though financial institutions called for almost three times as much. The increased funds will be made available until the beginning of April.

The International Monetary Fund's report is due to be published ahead of a meeting next month, and was leaked to Italian news agency Ansa.

Its verdict comes after the cash crisis and cut-price rescue of troubled US investment bank Bear Stearns sent markets plummeting at the beginning of the week.

The Federal Reserve, the US central bank, dropped its main interest rate by three quarter-points on Wednesday - the latest in a series of cuts which have seen the rate trimmed by 2% in the first three months of this year - and 3% since the credit crunch first erupted in global markets last August.

The moves come as the Fed attempts to rescue the world's biggest economy from the brink of recession and ease the pressure on the banking system.