Business and Personal Finance Dictionary

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• LOOSE CREDIT
  
  In order to combat a sluggish economy, the Federal Reserve Board (the Fed) sometimes institutes a loose credit policy. The Fed buys large quantities of Treasury securities, which gives banks additional money to lend at lower interest rates. This abundance, or looseness, of credit tends to stimulate borrowing, which in turn is designed to stimulate the economy as a whole. Tight money is the opposite of loose credit. It's the result of the Fed's selling securities, which makes borrowing-and therefore spending-harder. A tight money policy is designed to slow down a rapidly accelerating economy.
  
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