• The Federal Reserve cut interest rates by 50 basis points on Wednesday.

• But the lag in monetary policy means it'll take time to feel the relief.

• It'll take awhile for mortgage, car-loan, and credit-card rates to come down.

The nation's central bank has finally cut interest rates for the first time in over four years. But Americans might not feel that relief just yet.

On Wednesday, the Federal Open Market Committee announced an interest-rate cut of 50 basis points, concluding years of the Federal Reserve's aggressive inflation fighting as the US began recovering from the pandemic. It followed months of some experts and Democratic lawmakers calling for the Fed to cut rates to give Americans relief, and their calls were at last answered.

While the cuts signal good news for Americans — they reflect the Fed's confidence that inflation is returning to normal — it'll take time for consumers to feel the effects of lower rates. That's because there's a lag in monetary policy, meaning that it could take months for a rate cut this month to materialize for consumers. Further, rates for the kinds of loans most Americans hold are only indirectly affected by the Fed's moves.

"The universe of interest rates is one where the Federal Reserve's impacts vary, but the central bank helps set the tone even where there isn't a direct correlation," Mark Hamrick, a senior economic analyst for Bankrate, told Business Insider.

Erica Groshen, the senior economics advisor at Cornell University and a former commissioner of the Bureau of Labor Statistics, said in a statement to BI that lower rates would have at least three types of effects: They'll lower the cost of consumer borrowing, they'll similarly make corporate borrowing cheaper, and "people who live on interest on their savings will lose some of their income, and so may reduce their spending."

Those effects might not be felt right away.

One big area where consumers might experience the lag is credit cards. Credit-card interest rates are at historic highs — the Consumer Financial Protection Bureau found in a recent report that the average annual percentage rate on credit cards surged to 22.8% in 2023, nearly doubling over the past decade. Michele Raneri, a vice president and the head of US research and consulting at TransUnion, told BI that "it'll take a while for consumers to realize the benefit" of the cuts.

"A consumer who is carrying a balance is going to have to pay off the balance that they already have at that higher rate before the lower rate applies to their balance," Raneri said, meaning consumers with credit-card debt will continue to see high rates despite the Fed's cuts.