UK-Based Bank Expects More Pain for Financial System
Spring is in the air, and the credit crisis seems to be abating. But are the markets over-reacting to positive economic signs that have emerged in recent weeks? London-based Standard Chartered Bank thinks they are.
"The U.S. credit crisis has most likely reached the end of the beginning," according to an analysis from the bank.
Standard Chartered believes the next phase of the credit crunch will have negative macroeconomic implications for the U.S., led by tighter lending standards, and a lack of pass-through of Federal Reserve rate cuts to consumers.
In its analysis, the bank says it characterizes the outlook for foreign exchange as: “...split between 2Q, where we expect more broad USD weakness, and 2H where we expect some USD recovery as the rest of the world feels the knock-on effects."
Although many companies in the financial sector have already reported massive write-downs as a result of the credit crisis, experts at Standard Chartered believe more bad news may be coming.
Total write-downs so far have totaled just over $310 billion, but the bank expects that figure to be "substantially higher" by the end of the year.
– By Ed Coury, senior editor and Midwest bureau chief for the Wall Street Journal Radio Network, Dow Jones & Co., and a reporter for WWJ Newsradio 950.
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