A key question in this respect is how far down to go – an issue I’ll consider next. But assuming that the central bank has a view on the appropriate level, it is preferable to reach it sooner than later. The reason is that the stimulatory effect of a rate cut is limited if agents expect the central bank to implement further cuts.
Agents may delay their borrowing decisions for investment or consumption purposes until interest rates reach the lowest level. On the other hand, the rate which matters for investment or borrowing decisions is not necessarily the very short-term one. Longer-term rates also matter.