While the effect on financial conditions tends to be immediate or even anticipatory, the effects on activity and price setting in different sectors may occur with a lag, with highly interest-sensitive sectors such as housing adjusting quickly and less rate-sensitive sectors such as consumer spending on services adjusting more slowly.
In addition to the domestic effects from domestic tightening, there are cross-border effects of tightening through both trade and financial channels. U.S. monetary policy tightening reduces U.S. demand for foreign products, thus amplifying the effects of monetary tightening by foreign central banks. The same is true in reverse: Tightening in large jurisdictions abroad amplifies U.S. tightening by damping foreign demand for U.S. products.