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By John Nyradi

Today the International Monetary Fund cast a gloomier view of its world economic outlook as global growth continues to slow. U.S. growth is now expected to be 1.7% for 2013, down from its most recent projection of 1.9% that it forecast in April. Drag on global growth is expected to come from slowing U.S. growth, a worsening recession in Europe and slowing in China.

The IMF continues to say that "downside risks" dominate the global economic scene and that the end of the Federal Reserve's quantitative easing programs could create deeper slowdowns in emerging market economies as the flow of capital could reverse. Europe also continues to deteriorate as the IMF's new projection calls for a contraction of 0.6% for 2013, double its 0.3% estimate in April. Oil (NYSEARCA:USO) declined today on expectations that slowing global growth could reduce global demand for energy, and this offsets recent spikes in the price of oil generated by the political upheaval in Egypt.

The IMF is also concerned about market volatility generated by the Federal Reserve's plans to step back from quantitative easing. As U.S. Treasury (NYSEARCA:IEF) yields rise, bonds will attract capital from emerging market countries, which will trigger falling stock prices, higher interest rates and currency devaluations in those countries, further dampening global growth.

Slower growth extends from China (NYSEARCA:FXI) across the world to Brazil (NYSEARCA:EWZ) and Russia (NYSEARCA:RSX). Coming down firmly on the side of continued quantitative easing by global central banks, the IMF says that Japan's outlook is improved as "Abenomics" continues.

Bottom line: Global growth continues to slow, even as the Federal Reserve contemplates curtailing its easy money activities. Potential central bank action in Europe from the ECB and Bank of England could offset to some extent the Federal Reserve cutbacks, however, the risk of another global recession continues to grow.

Disclosure: Wall Street Sector Selector actively trades a wide range of exchange traded funds and positions can change at any time.

Source: Global Economic Growth Slowing More Than Previously Forecast, According To The IMF