Interest-rate cuts by the Federal Reserve can gradually lower borrowing costs for mortgages, auto loans, and business loans, which tends to encourage more consumer spending and business hiring.
October 08, 2025
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economic_mechanism
Typical transmission mechanism of conventional monetary policy
Reductions in a central bank's policy interest rate generally lead over time to lower borrowing costs for mortgages, auto loans, credit cards, and business loans, which tends to encourage consumer spending and business investment.
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mechanism
Transmission mechanism of monetary easing to the broader economy