IMF chief Rodrigo Rato said yesterday he was worried that corporate marriages built on big debts in a recent merger frenzy could end in tears.

Rising interest rates could spell trouble for more highly leveraged mergers and acquisitions, he said.

"This merger mania ... could be a show of complacency," Mr Rato told reporters at the G8 summit of industrialised nations.

Higher interest rates had already caused problems in some areas of the mortgage industry, he said in reference to recent repayment defaults and company collapses in the higher-risk end of the US mortgage market.

"We could see more of that in the mortgage market and other financial areas as monetary conditions tighten around the world," Mr Rato said.

He said he was not condemning mergers and acquisitions but that the danger lay in the extent to which some of the big ones were built on debt financing, which costs more to carry when interest rates rise.

"Some big mergers pose risks," he said. "This is not to say mergers are not good. But I think regulators should be careful."

Mr Rato said higher food prices compounded inflation risks already lurking as a result of five years of bumper economic growth at global level and persistently high energy prices.

The International Monetary Fund forecasts global economic growth of a healthy 4.9 per cent this year and next after a bumper 5.4 per cent in 2006, continuing a five-year run which is the best in 30 years, according to the IMF.

Mr Rato backed central bank policy of turning the screws on rates to combat the threat of inflation.

"Central banks should be vigilant to inflation pressures," he said.

"Central banks are right to act in a preventive manner."

For now, there are few signs of the global economy slowing, as Mr Rato himself repeated.

Credit is still cheap enough to maintain a seemingly relentless flow of corporate deals.

After a record 2006, mergers and acquisitions activity is still booming and global equity markets have been setting one record after another in recent weeks.

Dealogic, a firm tracking corporate activity, recently said mergers and acquisitions activity since January was 60 per cent higher than in 2006.