Fundamentally inflation happens when the money supply in circulation grows faster than the economy, deflation happens when the money supply grows slower than the economy.
Fractional reserve banking increases the effective money supply. A proportion of customers deposits are kept as central bank money in reserve. The rest is loaned or invested. The result is that the total customer deposits (which as far as the customer is concerned are effectively money) is greater than the totl ammount of "central bank money" in the system.
In our current system governments/central banks can control the effective money supply in a couple of ways. They can put in place minimum reserve requirements on banks and they can control the ammount of "central bank money" money in circulation.
For fractional reserve banking to work customers must have high confidence in the safety of the banking system. This is ensured through a cobination of government-backed "insurance" schemes and stract regulations on bank investment practices.
So what about bitcoin. The rules for the supply of real bitcoins (analogous to central bank money) are largely fixed. Afaict there is currently no significant fractional reserve bitcoin banking going on. So the inflation and deflation is largely tied to the size of the bitcoin economy and the proportion of bitcoin that is hoarded by speculators rather than circulatin in the bitcoin economy.
A successful introduction of fractional reseve banking would cause a sudden increase in the effective money suppy and with it a burst of inflation.
So the question is would fractionl reserve bitcoin banking be successful? My bet is NO.
The problem is how is the fractional reserve bitcoin bank going to invest the money that they aren't keeping in reserve. There are two options I see both bad.
1. They could make bitcoin denominated loans. However given bitcoins's overall deflationary tendancies and massive volatility only an idiot would take out such a loan.
2. They could invest in something non-bitcoin denominated but then the bank is taking on the risk from bitcoins deflation and volatility.
Either way I expect any fractional reserve bitcoin bank to find themselves bankrupt fairly quickly.