The recent economic turmoil started with concern about liquidity risk, which became a concern about credit risk, before turning into an economic risk question, Federal reserve Bank of Boston president Eric S. Rosengren said yesterday.
“As we move to a third phase, the focus has shifted to concerns about the economic risks — the risks generated by an economy that has slowed noticeably,” Rosengren said, according to text of prepared remarks released by the Fed. “While much of the turmoil in financial markets occurred during relatively benign macroeconomic conditions, the economic situation has changed. We have seen job losses, persistent increases in food and energy prices, and falling asset prices — all increasing the risk that less benign economic circumstances will add to the already intense challenges faced by financial institutions this year.”
