market condition that exists when the Federal Reserve, acting through the Federal Open Market Committee (FOMC), reduces the amount of credit available to the public through the banking system. This is sometimes known as draining reserves During periods of tight credit, borrowers face . stricter lending standards at rising interest rates, although interest rates may in fact be quite reasonable considering market demands for credit.
When the System Open Market Desk at the Federal Reserve Bank of New York sells Treasury securities, the supply of bank reserves diminishes and the federal funds rate that banks charge each other for overnight borrowings tends to rise. Rising interest rates are the result of tight Federal Reserve monetary policy, and also excessive growth in the economy, creating an inflationary situation of too much demand and not enough goods and services to meet market demands.
economic condition in which credit is difficult to secure, usually as the result of Federal Reserve Board action to restrict the money supply.
economic condition in which credit is difficult to secure, usually as the result of Federal Reserve action to restrict the money supply. The opposite is easy money.
