Source : The Straits Times, Sep 10, 2007
LONDON - THE recent credit crunch in the financial markets has provided a welcome 'reckoning' that should help in terms of long-term stability, the outgoing head of the International Monetary Fund (IMF) said in an interview published on Monday.
Speaking to the Financial Times from Cernobbio, Italy, at a conference of international financial policymakers, IMF Managing Director Rodrigo Rato said that this 'reckoning is probably a welcome one but it does not mean that it will be a painless one.'
Mr Rato, who is set to step down from his post in October, described recent market turmoil caused by problems in the US housing sector as a 'serious crisis.'
He acknowledged, however, that the crisis was occurring in 'a context of strong global growth and with strong macroeconomic fundamentals in many countries, and also high credibility of monetary authorities.'
'This is an important crisis that is still unfolding, and probably a high degree of uncertainty right now is the worst issue that we will have to resolve.'
The turmoil stems from a crisis in the US subprime mortgage sector, where home loans are granted to people with poor credit.
The subprime crisis has affected the broader financial markets, with several Wall Street banks hit with multibillion-dollar trading losses in mortgage-backed securities, spooking investors. -- AFP
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