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
Chart shows weekly average rates for three common mortgage types for 2007 to date.   (AP Photo)
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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.