Credit squeeze could continue into 2008

| October 17, 2007
”Credit

Problems in the US from the housing slump and the global credit squeeze could continue well into 2008 warned Henry Paulson, the US Treasury Secretary.

Mr Paulson and colleagues from the world’s leading economic policy-makers are getting ready for talks on Friday on the impact of the American housing and credit market turmoil. Mr Paulson gave a subdued appraisal of the outlook for the US and global economy.

In a speech at Georgetown University in Washington, Mr Paulson stated that the housing decline is still unfolding and it is the most significant current risk to the economy. The longer property prices remain static or decline, the greater the consequences to the future economic growth.

On Monday, Ben Bernanke, the Chairman of the US Federal Reserve, said that the housing market slump in the United States would remain a significant drag on American economic growth for many more months and that although credit market conditions had eased, significant risks remained.

Mr Bernanke added that conditions in financial markets have improved slightly since the worst of the problems in mid-August. However, a full recovery is likely to take time and setbacks are inevitable.

G7 finance ministers are preparing to discuss ways in which to prevent another repeat of the turbulence in the credit markets.


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