Central bankers warn sub-prime crisis could hit whole US economy

BASEL, Switzerland, Sept 10, 2007 (AFP) – The crisis in the US housing market risks spreading to the whole of the nation’s economy, European Central Bank chief Jean-Claude Trichet said Monday on behalf of world central bankers. Trichet was speaking in his capacity as head of the G10 group of central bankers from industrialised and emerging economies, who met at the Bank for International Settlements (BIS) here.

“There is a probability of fallout on the real economy in the USA,” Trichet said.

“We will have to follow very carefully what happens particularly in the USA. We will remain … alert, (there is) no time for complacency,” he added.

High numbers of defaults by high-risk or subprime borrowers in the US housing market sparked widespread fear of a global lack of credit in August, prompting stock markets to plummet.

Central banks in turn injected billions of dollars into the global economy.

Analysts in the United States said Sunday that the nation’s economic outlook had darkened with data showing stalling job growth, which prompted fears the housing slump would lead to a full-blown recession.

Friday’s US economic data showed the first contraction in employment in four years, a loss of 4,000 US p