How Long Does it Take Fed Rate Cuts to Affect the Economy: Experts Say One Year

Experts say that the recent fed rate cuts won’t have a positive impact on the economy until late 2008.

From the Wall Street Journal:

Those hoping that recent Federal Reserve rate cuts would be an immediate tonic for the economy’s ills may be disappointed, according to a Federal Reserve policy maker.

Fed Governor Frederic Mishkin said in a speech Thursday that Fed policy changes may not affect the economy for at least a year, meaning forecasts need to play a “central role” in policy making.

Because of the “inertial” aspect to changes in supply and demand, “monetary policy actions have little or no instantaneous effect on the economy,” Mr. Mishkin said in prepared remarks to the Massachusetts Institute of Technology.