Is the Fed's Fear of a Credit Crunch Coming True?

The Federal Reserve is facing its first significant pothole as the decisions made in hundreds of bank executive suites will either add up - or not - to an economy-shaping drop in lending. By raising the benchmark interest rate that banks use in lending money to each other, tighter monetary policy makes consumer and business loans more expensive and harder to get. In theory, that lowers demand for credit-financed goods and services, and in time also lowers inflation. The concern now is how far and fast that unfolds.