Rates as the price of time
Move the rate; watch the world arrive on a delay
A central bank changes one number — the policy rate. Everything downstream — Treasuries, mortgages, credit, equities, the dollar, jobs, prices — responds, but at different speeds.
Move the policy slider in the widget below and the timeline slider beneath it. Each channel has its own lag; the visualisation shows how the same policy change ripples out over months and years.
The front of the curve — short Treasuries, money-market funds, floating-rate debt — moves the day of the change. The 10-year and 30-year mortgage move within weeks as the market re-prices expected future rates. So far, none of this has touched the real economy.
Credit spreads, the dollar, and equity multiples adjust over months. Financial conditions ease (or tighten) into the real economy through borrowing costs, dollar competitiveness, and asset-price wealth effects. Still no real-economy data yet.
Hiring, unemployment, and inflation respond on a 12–18 month lag. By the time the labor market and inflation data confirm a policy change worked, the central bank has been making the decision for over a year. This is why "is the policy working?" is the wrong question 6 months in.
When a Fed cut hits the news, three things have already happened — and most haven't.
Treasuries, mortgages, and credit spreads moved within hours. Equities and the dollar adjust over weeks. Hiring decisions and inflation move over a year. The "did it work?" question makes sense only on the 12–18 month timescale that matches the slowest channel — but the political clock is much shorter.