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IMF: Credit crunch could cost $1 trillion

The total losses suffered in the ongoing credit crisis might reach $945 billion as the bad debts written off by banks lead to further damage in other sectors, it has been suggested.

According to the International Monetary Fund (IMF), there was a "collective failure" to recognise the risks of the asset-backed security sales that triggered the credit crunch.

This might now mean that sectors such as commercial property and consumer credit will come under increasing pressure, the IMF's latest Global Stability Report claimed.

The new study also warned that the global markets "remain under considerable strain", despite "unprecedented" actions from central banks.

A full three per cent has already been sliced from interest rates by the Federal Reserve over recent months, and it and other banks have made several attempts to inject liquidity into the markets in this time.

Elsewhere, IMF head Dominique Strauss-Kahn has hinted that still further intervention would be needed from central banks in the future, in order to lighten the economic gloom.

"The forecasts we are going to release in a few days are not very optimistic," he told the Financial Times.