Fed Leaves Rates Unchanged AgainHis remark came after the Federal Open Markets Committee (FOMC) kept the central bank’s benchmark interest rate at its current level and also released a summary of economic projections, which is also known as the “dot plot,” reported Fox Business. This showed that the members expect two Fed interest rate cuts in 2025, followed by one cut each in 2026 and 2027, as per the report.Inflation and Weak Economy Ahead?The FOMC also forecasted that PCE inflation will increase to 3% this year and then fall to 2.4% in 2026 and 2.1% in the following year, as per Fox Business reported. While the real GDP is projected to contract to 1.4% in 2025 before growth picks up to 1.6% in 2026 and 1.8% in 2027, according to the report. FOMC also expected that unemployment would increase to 4.5% in 2025 and 2026, before falling to 4.4% in 2027, as per the report.
Peter Schiff Predicts Higher Inflation and a Sluggish EconomySchiff, who is the chief economist at Euro Pacific Asset Management, said that he thought inflation will be “a lot higher” than the Fed expects and that the US economy will be “a lot weaker,” as quoted by Fox Business. He also said that the “big problem” for inflation is “all of the inflation chickens that the Fed has been releasing for more than a decade are coming home to roost,” as quoted by Fox Business.He went on to predict that the United States will experience stagflation “with a recession and much higher inflation happening at the same time, really complicating the defense ability to try to do something about either problem,” as quoted in the report. The economist also warned that America is on the path to “runaway inflation” that could become “hyperinflation,” quoted Fox Business.Schiff explained that lower interest rates will not help the US economy, and even said that it was the “cause,” as per the report.
He suggested that, “The solution involves much higher interest rates,” adding, “Now, I understand that’s going to be very painful, given the economy that we’ve created, built on a foundation of cheap money,” quoted Fox Business.
The economist pointed out that “It means stock prices come down, real estate prices go down, companies fail,” adding, “There’s going to be bankruptcies. There is going to be defaults. There’s going to be a protracted recession, probably a much worse financial crisis than 2008, but all that has to happen because the alternative to that is even worse,” as quoted in the report.
FAQsWhat did Schiff say about the Fed’s decision?
He criticised the Fed for keeping interest rates unchanged and said they are relying on “wishful thinking,” as per Fox Business report.
What is Schiff’s inflation prediction?
He expects inflation to be much higher than the Fed is forecasting.