Schiff on Fox Business: Powell Admits Inflation is Up

On Wednesday, after the Fed’s 25 basis point rate reduction was announced, Peter appeared on Fox Business to give his initial analysis of the policy move. Peter starts the interview by criticizing Jerome Powell’s messaging, pointing out that Powell is overstating how hawkish he’s been on inflation.

Beyond that, the possibility of a bear market will affect the incoming Trump administration’s policy environment:

We may be getting a bear market for Christmas, and that might be the environment that Trump inherits when he becomes president in January. You know, investors were very complacent about the risks of rates not being cut as much as they thought. Powell finally today was reluctant to admit that inflation is not only headed up, it’s higher than the Fed expected, and Powell thinks it could take another two years to get inflation back down to 2%. Now, he’s wrong. Inflation won’t be anywhere near 2% in two years. It’s going to be higher than it is right now.

Powell suggests there will still be cuts in 2025, even if there will be fewer than anticipated. This is the exact wrong message when inflation is still above the Fed’s target:

I think Powell is speaking out of both sides of his mouth as well, because given what he acknowledged about inflation, it made no sense to cut rates today. It made no sense to indicate that more rate cuts are coming. If anything, what Powell should be fessing up to is the fact that they started cutting too soon. In fact, they aborted their hiking too soon. Rates never really got into restrictive territory, and they’re still not restrictive. 

All of this obfuscation serves policymakers and politicians, who stand to lose their power and credibility if the reality of a recessionary economy is revealed: 

That’s very likely. I think the economy, as I said, may already be in recession. It may have been in there for a while. Inflation can disguise a recession, because by making all the prices go up, it looks like the economy is getting stronger, but it’s not. It’s just inflation is getting stronger, and that’s why the voters– if you look at the exit polls– the number one issue was how weak the economy was.

For Peter’s full in-depth analysis of the Fed’s announcement, be sure to check out the 1000th episode of the Peter Schiff Show.