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Economists increasingly worry that banks are suffering such massive losses that they will be forced to cut back their lending to consumers and businesses. That would slow the economy, much as the savings and loan crisis did in the early 1990s.

Yesterday, an analyst predicted that Citigroup, the world's biggest financial services company, would suffer another $15 billion in losses in the coming six months from its exposure to exotic types of debt.

Fallout From Credit Crunch Creates Another One

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WASHINGTON (MarketWatch) -- The U.S. economy will slow by more than previously thought in 2008 but inflation will remain tame, according to the economic forecasts of top Federal Reserve officials released for the first time on Tuesday. Fed officials said growth would slow to a range of 1.8% to 2.5% next year, down from growth around 2.45% in 2007. Some Fed officials were more pessimistic, putting growth down as low as 1.6% next year.

The unemployment rate is expected to tick up to about 4.9% in the fourth quarter of 2008, up from the latest reading in October. Inflation is expected to remain contained. Headline inflation, as measured by the PCE index, is expected to slow to 1.8%-2.1% in 2008, down from around 2.95% this year. Core inflation will remain steady in a range of 1.7%-1.9%. The Fed forecasts go out to 2010. The Fed sees the economy growing at a moderate pace in the neighborhood of 2.6% in 2009 and 2010, with a steady unemployment rate and continued low inflation

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