Loose credit
Loose credit
Cheap Money
Loose credit.
In order to combat a sluggish economy, the Federal Reserve's Open Market Committee (FOMC) may institute a loose credit policy.
In that case, the Federal Reserve Bank of New York buys large quantities of Treasury securities in the open market, which gives banks additional money to lend at lower interest rates. This abundance, or looseness, of credit is intended to stimulate borrowing and invigorate the economy.
Tight money is the opposite of loose credit. It's the result of the Fed's decision to sell securities in the open market, which reduces bank reserves and makes borrowing more expensive. A tight money policy is designed to slow down a rapidly accelerating economy.