Marketplace All-in-One Rate cut? So what?
Sep 23, 2025
Justin Ho, a Marketplace reporter specializing in Federal Reserve policy, joins the conversation to analyze the implications of potential rate cuts. He explains how a major reduction could lower bond yields and borrowing costs, encouraging spending but risking inflation in the long term. The discussion also touches on the resilience of U.S. economic growth, despite challenges like the ending of EV tax credits for auto dealers and the complex logistics faced by traveling nurses.
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Rate Cuts Shift Short vs Long Yields
- Large, rapid Fed rate cuts would push short-term Treasury yields sharply lower and reduce borrowing costs quickly.
- But higher inflation risk would likely raise long-term yields later and could force the Fed to hike again.
Immediate Consumer Borrowing Effects
- Falling short-term rates immediately lower costs on credit cards and student loans and reduce bank deposit returns.
- Those changes spur consumer and corporate spending but also risk rekindling inflation pressure.
Inflation Expectations Raise Longer Rates
- Higher inflation expectations would push long-term yields up as investors demand compensation for future rate hikes and erosion of returns.
- That would raise mortgage and corporate borrowing costs and could slow the economy and raise unemployment.