On this episode of Adam Talks, tax attorney and IRA Financial’s founder, Adam Bergman, Esq., discusses his thoughts on the news that the Fed, led by Jerome Powell, will look to cut interest rates in the very near future.
What Is the Fed Thinking?
In the latest episode of Adam Talks, tax attorney Adam Bergman discusses his concerns over the Federal Reserve’s potential decision to lower interest rates, a move he believes could be a significant mistake. He questions Federal Reserve Chair Jerome Powell’s understanding of the current economic conditions, highlighting the sharp rise in the cost of essential items such as food, travel, auto insurance, and home insurance. Bergman points out that while the Fed aims to hit a 2% inflation target, the actual inflation rate and consumer prices remain significantly higher than this goal.
Bergman shares data from the Consumer Price Index (CPI) to illustrate his point, noting that food prices, both at home and in restaurants, have seen substantial increases. He discusses the rise in prices for specific items like eggs, baby food, and meats, emphasizing that these increases contribute to the overall inflationary pressure felt by consumers. He argues that the Fed’s decision to lower interest rates should consider these rising costs, which continue to affect the average consumer.
Bergman also delves into the unemployment rate, another factor Powell cites for considering a rate cut. He notes that the current unemployment rate, although slightly higher than during the COVID-19 pandemic, is still historically low compared to the average rate over the last 80 years. He believes the Fed is not looking at the bigger picture and warns that lowering interest rates could lead to more inflation, particularly in the housing market.
Home prices have also seen significant increases, with Bergman providing data to show that prices have risen dramatically over the past four years. He argues that lowering interest rates will not help the housing market but will instead drive prices higher, making homes more unaffordable for many Americans. He compares the growth in home prices from 1980 to 2024, demonstrating a steep increase that he attributes to inflationary pressures.
Bergman also touches on other areas where prices have surged, such as travel and auto insurance. He mentions that while gas prices have remained relatively stable, other essential costs continue to climb, putting additional strain on consumers. He criticizes the Fed for being late in addressing inflation initially and fears that the current approach will only exacerbate the problem.
In conclusion, Bergman expresses his concern that lowering interest rates now could lead to an unmanageable level of inflation in the future. He suggests that the Fed should focus on controlling prices rather than reacting to unemployment rates that are still below historical averages. Bergman emphasizes the importance of addressing the real costs faced by consumers, such as food, shelter, and insurance, to avoid further economic issues.
