Business: Of Climb, Crunch and Slump

Squeeze gave way to ouch last week as Chase Manhattan and Citibank lifted their prime lending rate to businesses from 9¾% to 10%, the highest since January 1975. Other banks are expected to follow suit. The action, reflecting a steady tightening of money by the Federal Reserve Board, substantially increases the risk of a credit crunch and a deeper economic downturn next year than most experts were forecasting a few months ago. The hike is certain to pull up other rates and dampen spending by boosting the cost of corporate loans and, eventually, of consumer borrowing.

In the past month the board...

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