The financial encyclopedia uses cookies to improve your user experience. Find out more here!




Credit squeeze


A popular term for the State's interference with normal market forces in an attempt to lower the level of economic activity by reducing the money supply. lt is effected by making credit more expensive in the following ways: through direct instruction to banks; by raising the minimum lending rate or Bank of England base rate so as to force other organizations linked to the money market to increase their rates accordingly; by making changes in the hire purchase regulations so as to deter prospective purchasers.

Reference: The Penguin Business Dictionary, 3rd edt.