So we’re expecting a rate cut. When will we start to see a difference in the economy?

If you’ve been anxiously awaiting financial relief from the Federal Reserve, you are about to get a rude awakening.

If you’ve been anxiously awaiting financial relief from the Federal Reserve, you are about to get a rude awakening. After keeping interest rates at a 23-year high for over a year, the Fed is widely expected to announce Wednesday it is finally cutting its benchmark lending rate. And Fed Chair Jerome Powell could very well signal that more cuts could be coming at future meetings. If that pans out, it’ll be the moment investors spent every waking second of every hour dreaming of since the central bank started raising interest rates in March 2022 to get inflation back in check. Don’t be surprised if all their rejoicing sends stocks to new record highs. But don’t be fooled: Most Americans will have to squint pretty hard to notice much of a difference from one cut, or even multiple cuts, for at least a year, if not more. Central banks cut interest rates for two main reasons: financial conditions are expected to worsen drastically, or inflation has cooled so much that leaving interest rates at high levels will be overly restrictive and put a drag on the economy. This time around, most economists believe the Fed will cut for the latter reason. When the Fed wants to relieve pressure across the economy, it lowers what’s officially referred to as its target federal funds rate, which is the interest rate that commercial banks charge each other to ensure they satisfy the required amount of money they need to set aside at all times.