credit squeeze

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Credit Squeeze

A situation in which it is difficult to finance through borrowing. A credit squeeze often occurs when economic growth is declining and/or when interest rates rise. The Federal Reserve is often blamed for credit squeezes when they raise target interest rates, but it may occur through private sector actions as well, such as a systemic rise in bad debt. See also: Credit crunch.

credit squeeze

Restricted bank lending that is accompanied by rising short-term interest rates and a decline in economic growth. Credit squeezes are generally attributed to policy actions of the Federal Reserve.

credit squeeze

an attempt by the monetary authorities to reduce the amount of CREDIT granted by financial institutions to consumers and businesses, in order to reduce the level of spending in the economy. A credit squeeze forces up INTEREST RATES, affecting businesses by reducing consumer demand and raising the cost of financing stockholding and investment. See MONETARY POLICY.

credit squeeze

any action taken by the monetary authorities to reduce the amount of CREDIT granted by COMMERCIAL BANKS, FINANCE HOUSES, etc. Such action forms part of the government's MONETARY POLICY directed towards reducing AGGREGATE DEMAND by making less credit available and forcing up INTEREST RATES.
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