Credit score Suisse shouldn’t be about to trigger a Lehman second, economist Sri-Kumar says

Worries are mounting over Credit score Suisse’s monetary well being — however that does not imply markets are headed towards a “Lehman second,” mentioned the president of Sri-Kumar International Methods.

“I believe the Federal Reserve goes to must face the implications of a credit score occasion” if it have been to happen, Komal Sri-Kumar informed CNBC’s “Squawk Field Asia” on Monday. “One thing goes to interrupt.”

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“This may increasingly or will not be a Lehman second,” he mentioned, referring to the collapse of Lehman Brothers in 2008, which triggered a string of massive Wall Road bailouts and a subsequent monetary disaster.

Over the weekend, a number of media shops reported that Credit score Suisse sought to assuage traders’ issues over its monetary well being — the Swiss financial institution reportedly contacted its greatest purchasers after its credit score default swaps rose sharply.

CDSs are primarily insurance coverage bets towards defaults and a credit score occasion refers to a unfavourable and sudden change within the borrower’s means to repay its debt.

A protracted-time critic of the Fed’s strategy to the rise of costs, Sri-Kumar mentioned the newest occasions surrounding Credit score Suisse reveals the “actual hazard of getting miscalculated inflation for such a very long time.”

“They’re attempting to make up for it by doing every little thing in a rush,” he mentioned, referring to the Fed’s continued hawkish coverage and pledge to proceed mountaineering rates of interest to tamp down on inflation.

Within the Fed’s newest financial coverage assembly in September, the central financial institution raised its benchmark fee by three-quarters of a proportion level and indicated it’s going to preserve elevating charges nicely above the present stage.

Sri-Kumar mentioned such makes an attempt at controlling inflation is harmful for markets worldwide.

“It carries an infinite quantity of danger to the worldwide system by way of what the assorted central banks are doing,” he mentioned.

The most recent reviews of Credit score Suisse’s actions to calm involved traders may level to an eventual shift within the Fed’s course, mentioned John Vail, chief international strategist at Nikko Asset Administration.

“The silver lining at finish of this era, is the truth that central banks will most likely begin to relent a while as each inflation is down and monetary circumstances worsen dramatically,” he mentioned on CNBC’s “Squawk Field Asia” Monday.

“I do not assume it is the tip of the world, nevertheless it may get scary for the following quarter or so,” he mentioned.