Interest rate cut!?

Question

I know that Fed's just cut the interest by another quarter-point to encourage consumer spending...
but why are all the analysts saying that it would take really long for that effect to take place?

Answer 1

There are several factors at work.
1) Entrepreneurs are more willing to borrow however it takes time for them to get plans approved, borrow the money and put their plans into action.
2) Consumers will start increasing their spending immediately, however this increased spending will first be seen as reducing stocks which have built up whilst rates were high. When stocks are reduced, the increased demand will be translated into increased production.
3) Some investment will be attracted overseas where interest rates are still high. This will be offset, somewhat by more borrowing in the local economy.

That will do for now. Do some research of your own to see other factors.

Answer 2

Consumers are already maxed out and it will take time for settlment to occur.