I Asked ChatGPT What More Fed Rate Cuts Mean for the Economy — Here’s What It Said
Written by
Vance Cariaga
Edited by
Cory Dudak
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The Federal Reserve finally lowered interest rates in September, cutting its benchmark lending rate by a quarter of a point to a new range of 4% to 4.25%. It was the first rate cut in 2025. Many economists expect the Fed to make further cuts by the end of the year, although it’s still uncertain how many more cuts will be announced and by how much.
“For now, one more 25 (basis point) cut in 2025 looks appropriate,” Lauren Goodwin, economist and Chief Market Strategist at New York Life Investments, wrote in an email note shared with GOBankingRates.
How will further rate cuts impact the U.S. economy? We asked ChatGPT that question, and here’s what it had to say.
First, the Basics
When asked how Federal Reserve rate cuts affect the economy in general, ChatGPT listed the following key impacts that happen whenever cuts are implemented:
- Cheaper borrowing costs. Interest rates on business and personal loans go down, making it less expensive to borrow money.
- More consumer spending. Lower interest rates mean consumers tend to spend more (and save less) — especially on big-ticket items.
- Increased business investment. When rates go down, companies are more likely to borrow money for expansion, hiring and new projects, which leads to job creation and economic growth.
- Stock market growth. Increased consumer spending and business investment tend to push the stock markets higher as more investors switch to equities.
- Weaker U.S. dollar: Lower rates make the dollar “less attractive” to foreign investors. While U.S. exports are cheaper, imports are more expensive.
- Inflationary pressure. Lower interest rates often lead to excessive spending, which causes prices to rise.
- Boosts housing market. Lower mortgage rates can increase homebuying and boost housing prices.
What’s the Impact in 2025?
As ChatGPT noted, the full economic impact of further rate cuts depends on the size of the cuts and when they take place. When asked about the impact of further rate cuts in 2025, ChatGPT said “many forecasts expect two to three more cuts” before the end of the year, for a total of 50 to 75 basis points. However, some economists “think the pace will be slower given sticky inflation and uncertainty.”
If the Fed does cut rates further another 50 to 75 basis points in 2025, here’s how the effects might play out, according to ChatGPT.
| Channel | Expected Effect | Notes and Modifiers |
| Consumption and borrowing | More affordable consumer credit (credit cards, auto, some short-term loans), small downward pressure on mortgage rates | Mortgage rates don’t always move in lockstep with Fed cuts (they also depend on longer-term yields). So the boost to housing may be delayed or muted. |
| Business investment | Easier funding for capex, expansion, and inventory building, especially for smaller firms | Firms will likely respond only if demand stabilizes. In a weak demand environment, rate cuts might not fully translate into new investment. |
| Housing and real estate | Some stimulus via refinancing, improved affordability, higher housing demand | The existing backlog of high borrowing rates and supply constraints may slow the response. |
| Labor market | Slower increases in unemployment, or a more gradual decline in hiring as firms feel less pressure | In a softening economy, cuts may help prevent sharper layoffs. |
| Asset prices and financial markets | Further gains in equities, pressure on bond yields (especially short- to medium-term) | Investors may reprice risk, tilt toward equities and corporate credit. |
| Exchange rates and trade | A somewhat weaker U.S. dollar, making exports more competitive (imports more expensive) | Global interest rate differentials matter — if other central banks are also easing, the relative effect might be modest. |
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