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Credit Crunch Slows Spending

Consumers, businesses tighten belts just as economy needs fuel

By Jim O'Neill,  Newser User

Posted Mar 18, 2008 11:10 AM CDT
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(Newser) – Fewer credit card offers, tougher mortgage requirements, and a slowdown in business expansion all are likely because of the worsening credit crisis, reports the Washington Post. Banks are looking to limit exposure to high-risk customers and restore their own bottom lines. And that’s tough medicine for an economy that’s grown on the back of cheap money.

Even though the Fed has been cutting interest rates—another 1% reduction could come today—little of that has trickled down to consumers and businesses. "Because there's greater risk now in lending, credit card companies have been raising their rates a little bit as the Fed has been cutting," said a credit expert. The result has been a tightening of spending at a time when the Fed would like it to increase to help stimulate the economy.

Chart shows weekly average rates for three common mortgage types for 2007 to date.
Chart shows weekly average rates for three common mortgage types for 2007 to date.   (AP Photo)
A sign stands sentry outside an existing home on the market in the Country Club area southeast of downtown Denver.
A sign stands sentry outside an existing home on the market in the Country Club area southeast of downtown Denver.   (AP Photo/David Zalubowski)
Consumers are spending less as credit woes force them to tighten their belts.
Consumers are spending less as credit woes force them to tighten their belts.   (AP Photo/Steve Helber)
Consumer spending has slowed as the credit crisis has prompted consumers to tighten their belts.
Consumer spending has slowed as the credit crisis has prompted consumers to tighten their belts.   (AP Photo/Steve Helber)
Graphic shows the federal interest rates since 1990.
Graphic shows the federal interest rates since 1990.   (AP Photo)
A foreclosure sign tops a sale sign outside an existing home on the market in northwest Denver.
A foreclosure sign tops a sale sign outside an existing home on the market in northwest Denver.   (AP Photo/David Zalubowski, file)
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What impact will the credit crisis have on you?
Associated Press

Economy still has a ways to go before it hits bottom
Sacramento Bee

 
Federal Reserve • consumer spending • credit card • interest rate • credit crisis • banking

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