Is the Fed Cutting Rates a Good Thing?

"Hey Mike, what should we know about the Fed cutting rates?"

Discover some of the cautionary flags you may want to consider as the Federal Reserve signals more rate cuts.

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Episode Transcript

Mike (00:05):
Welcome to How to Retire On Time, a show that answers
your retirement questions. We'rehere to move past that
oversimplified advice you'veheard hundreds of times.
Instead, we're gonna dive intothat nitty gritty. So as always,
text your questions to [phone] anytime during the
week, and we'll feature them onthe show. Just remember, not
financial advice.
This is an educational show.David, what do we got today?

David (00:28):
Hey, Mike. What should we know about the Fed cutting
rates?

Mike (00:32):
It's an interesting conundrum because you have to
ask, why is the Fed cuttingrates?
There's only a couple ofreasons. One, the economy is not
as healthy as it appears to be.Or two, inflation is going too
low. I don't really see thatbeing a problem. I mean, why is
the Fed cutting rates?

(00:53):
There has to be a reason. If theeconomy is growing at a healthy
rate, which by most metricsright now it is, then it's
either an issue with what theysee as a tariff issue because
many will argue that tariffs aredelayed inflation. Some argue,
well, it's already built in, soit's not gonna be there. Well,
which is true? Is the job marketmore at risk?

(01:17):
Are we more at risk ofrecession? There has to be a
reason why the Fed would droprates. Because when the markets
crash, they wanna have theirrates high. So when the markets
crash, they can drop it more. Sothey're giving up critical
positioning for a reason.
Now you might say, well, wefixed inflation, so why not grow
the economy? So maybe they'rebacking off a little bit to let

(01:40):
the economy grow, but it's stillwithin their 3% target. Mhmm.
Maybe that's it. But even then,I don't know if that's why.
So you just have to look at itfrom you ever, like, done people
watching, and you're like, whyis that person acting that way?
Yeah. Sure. Well, there's areason for it, whether you

(02:00):
understand it or not. I don'tpersonally have road rage.
When someone cuts me off, mythought is, I wonder what
they're going through that Idon't know that's causing them
to make such a dangerous move.That seems like a healthy way to
look at it. Yeah. I mean, therewas one time I had to rush my
kid to the hospital, and I wasvery aggressive on the driving.

(02:21):
I don't wanna indict myself overYeah.
Don't incriminate. But, I mean,it was it was certainly like I
was accelerating a little bitfaster than normal. I was trying
to get right to the hospital asfast as possible, and he was
fine. All was well, but it was avery scary moment. He choked.
I cleared up most of it, but hewas still having a hard time
breathing. And I'm going, well,he's gonna die. So we went
straight to the hospital very,very quickly. So yeah. I mean,

(02:44):
if someone cuts me off, Maybetheir spouse, their their wife
is pregnant about to give birth.
Yeah. Maybe maybe they're latefor their job that they're about
to get fired. We just don'tknow. Maybe they're just a jerk.
That's also possible, but I'mgonna give people the benefit of
the doubt.
Yes. I don't like it, but I'mgonna try and understand why is

(03:05):
the person acting a certain way.With the Fed, you have to ask,
why are they doing it? Now keepin mind, it could be to try and
alleviate parts of the realestate market because it's very
unaffordable. But Powell's smartenough to know that if he lowers
the Fed's rates, it doesn'tactually lower the treasury

(03:26):
rate.
The treasury rate is based onScott Bessent, you know, the
treasury secretary and the ratesthat he offers based on what the
market's willing to accept. So Ithink that there's more to the
story than is being told.Anytime the rates start to go
down, I think it's the canary inthe coal mine that maybe the
economy is weaker than werealize. I look forward to the

(03:48):
Fed minutes. They're veryintense discussions to then go
through that and really try topick apart what's really going
on because there has to be areason.
That's all the time we've gotfor the show today. If you
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(04:11):
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