Credit crisis spreading in 'negative feedback loop': IMF

AFP, July, 2008

WASHINGTON (AFP) — The credit crisis stemming from the US housing slump has triggered a "negative feedback loop" in the global economy that poses risks for growth, the International Monetary Fund said Monday.

"Global financial markets continue to be fragile and indicators of systemic risks remain elevated," the IMF said in an update of its April report on global financial stability.

A year after the financial markets were battered by the US subprime, or high-risk, home mortgage crisis, those expected losses have now been "largely acknowledged" by financial institutions but the risk contagion has spread to other forms of credit.

"Credit quality across many loan classes has begun to deteriorate with declining house prices and slowing economic growth," the...