Quantity rationing of credit, when some firms are denied loans, has macroeconomic effects not fully captured by measures of borrowing costs. This paper develops a monetary DSGE model with quantity rationing and derives a Phillips Curve relation where inflation dynamics depend on excess unemployment, a risk premium and the fraction of firms receiving financing. Excess unemployment is defined as that which arises from disruptions in credit flows. GMM estimates using data from a survey of bank managers confirms the importance of these variables for inflation dynamics.