Catenaa, Friday, December 05, 2025- Benefits to the US economy from the expected rate cut by the Federal Reserve this month are likely to take much longer to show up than normal, Bloomberg News reported.
Rate-sensitive industries, like housing, could see a limited benefit from lower borrowing costs because home prices remain near record highs, and Americans are worried about the labor market.
Other sectors, like manufacturing, have held back investments due to President Donald Trump’s ever-changing tariffs, something lower rates would do little to help.
With those overhangs, the typical timeline for Fed policy to start impacting consumers and businesses broadly, which can stretch up to 18 months, may not apply in the current economy.
“Companies have really paused hiring not so much because interest rates are high, but mostly they’ve pulled back because of uncertainty about the impact of tariffs and other changes in economic policy,” said Kathy Bostjancic, Chief Economist at Nationwide Mutual Insurance told Bloomber “And so if that uncertainty persisted at a very high level, that could make the lag longer and feed-through to the economy longer.”
When the Fed adjusts its benchmark rate, financial markets react accordingly. But often, the central bank’s moves are telegraphed well in advance, so investors’ expectations are usually already reflected in stock and bond prices before officials act.
That has a more immediate effect on new loans taken out for things like cars and mortgages, while outstanding consumer and business debt, which is typically at a fixed rate, takes longer to respond.
Rates on auto loans, mortgages, student loans, and credit cards were among the first to jump when the Fed started raising rates in 2022. But they haven’t fallen as much on the way down.
That’s compounded an affordability crisis for buying a car or a house, as those prices are out of reach for many Americans.
