Investor aversion to risk threatens to deepen the nation’s credit crunch and slow the economy, the president of the Federal Reserve Bank of Boston said Thursday.
Eric Rosengren said a “liquidity lock” in key credit markets “compounds problems created by a traditional credit crunch” by impeding even short-term financing for the most creditworthy firms.
“If it were to persist, this unwillingness to take credit risk, or to lend money other than overnight, could constrain creditworthy borrowers from undertaking worthwhile projects — and thus have implications for economic growth,” Mr. Rosengren said in a speech Thursday at the University of Wisconsin-Madison.