CNN writer — when Fed lowers interest rates, it takes 9 to 15 months to see main effect.

[Multicolored Lemur]

Analysis: Why the economy is set – for now

financial writer Richard Quest

Monday, Aug 5 —

“There is always a lag between when rates go up and when the economy sees the full effects. That gap is generally between 9-15 months and is called the monetary lag.

“By now, the Federal Reserve’s cumulative rate hikes are weighing down employment, which is always among the last bits of the economy to feel the effect. Why? Because companies are reluctant to lay off staff and take on new employees.

“This is what we are seeing now. The Fed’s medicine has crushed inflation, but it’s also causing companies to lay off or not hire more staff. . . ”

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So, he’s saying companies put off making changes in staffing levels until they’re really sure.

Okay, it’s the nature of a modern economy that economic effects are going to be delayed. It also means the economy is resilient and can absorb.

But if makes it tough for democracy.

Even if the 2 parties rather closely bracket public opinion, when things are delayed 9 to 15 months, and it might even be broader than that ….

Some people over-perceive. Other people don’t pay attention at all.

Maybe at most, “the public” as a whole can pay attention to 3 things ? ? ?

 

[AgnosticBoy]

It's amazing how the Feds have to keep a tight balance when it comes to lowering or higher interest rates. The Feds have to cut rates to reduce inflation but then cutting rates too fast or having it low for too long could actually increase inflation.

“This is what we are seeing now. The Fed’s medicine has crushed inflation, but it’s also causing companies to lay off or not hire more staff. . . ”

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So, he’s saying companies put off making changes in staffing levels until they’re really sure.

Agreed. Usually decreasing interest rates goes with more hiring (or less unemployment), but business confidence being at a low can either stall or have the opposite effect.