The standby wait time will decrease if fewer fast passes are issued. Currently, the posted wait time is inclusive of only the standby line. It does not take into account the shorter wait in the FP line. For example, a 60 minute wait in the standby line and a zero minute wait in the FP line is an average wait of 30 minutes. FP is basically an authorized "cut in line". Standby guests wait longer while the FP people cut in front. Fewer FPs mean fewer people cutting in front of the line. They would enter the line behind you, instead of in front of you, thus not extending your wait.
Also, many, many people who now use the FP to full advantage would never wait 60 minutes. So, fewer FPs issued will also discourage some people from entering a standby line, even if it is decreased to 40 minutes, by the fewer FPs issued.