The Federal Reserve did exactly what the markets expected on Wednesday, cutting interest rates by another 25 basis points.
The central bank sent out mixed signals about what will happen next. Markets widely construed the Fed’s messaging as somewhat hawkish. In its policy statement, the Fed said the US economy is growing at a “moderate” rate and the labor market “remains strong. It cut rates, “in light of the implications of global developments for the economic outlook as well as muted inflation pressures.”
In his podcast, Peter Schiff reiterated this was just another step toward zero and said whatever the Fed wants to call its mechanizations, they’re going to stink to high heaven.
Peter Schiff has been saying that the Federal Reserve is going to take interest rates back to zero and launch another round of quantitative easing in order to reinflate the bubble economy after the next crash. The central bank successfully pulled this off after the 2008 crisis. By dropping rates to zero and holding them there for nearly a decade, and running three rounds of QE, the Fed has reinflated the real estate bubble, blown up a bond bubble and pumped up the stock market. But Peter said it’s not going to work the next time around. Instead, Fed monetary policy will tank the dollar and lead to an inflationary recession.
So, why can’t the Fed pull off another rescue? Peter explained why he thinks it’s not possible during an interview on the Tom Woods Show.
Has QE4 already started?
For the first time since October 2014, the Federal Reserve has bought a significant number of US Treasurys. Over the past two weeks, the Fed purchased $14 billion in US bonds.
The Federal Reserve has the US economy on monetary life support and Daily Reckoning managing editor Brian Maher says it will never again breathe on its own. As hedge fund manager Kyle Bass put it, the economy is trapped within the inescapable tractor beam of zero percent interest rates.
All eyes will focus on the Federal Reserve as it wraps up its June meeting. But it’s important to remember the Fed isn’t the only game in town. Moves by the European Central Bank also have a significant impact on the global economy (and the gold market) and it has taken a decidedly dovish turn.
Most analysts expect the Fed to hold interest rates steady in June, but potentially set the stage for a July rate cut. (Although Jim Grant said he thinks the Fed will actually cut this month.)
In December, Peter Schiff predicted that the Federal Reserve was about to hike rates for the last time and that the next step would be rate cuts. Yesterday, Jerome Powell made comments widely interpreted to signal the rising likelihood of a rate cut. The Fed chair dropped the word “patient” from his vocabulary, saying the central bank would respond as “as appropriate” to the perceived economic impacts of tariffs and other economic data.
Peter appeared on Fox Business Countdown to the Closing Bell with Liz Claman to talk about what’s next up for the Fed and how it will impact the economy.
The “Powell Pause” is not enough. President Donald Trump not only wants interest rates cuts; he wants to put quantitative easing back in play.
During an interview Friday, the president once again complained about the Fed’s 2018 interest rate increases, saying “they really slowed us down.” Trump wants stimulus and called on the Fed to resume Obama era QE.
Ever since the beginning of the “Powell Pause,” Peter Schiff has been saying it won’t be enough.
If the Fed doesn’t want to upset the markets, soon it will be forced to go back to QE and zero percent interest rates.”
Peter isn’t alone in saying this. After the most recent FOMC meeting, Ryan McMaken at the Mises Institute echoed Peter’s message.
Put simply: the days of quantitative easing are back, and we’re not even in a recession yet.”
All of a sudden, the Federal Reserve is considering increasing its balance sheet again.
Remember back in September? QE was on “autopilot.” Then we got the “Powell Pause” and suddenly, the talk was that balance sheet reduction could be winding down. Powell confirmed that was the case just a couple of weeks ago when he told a congressional panel the central bank would be in a position to “to stop runoff later this year.”
After weeks of hinting, Federal Reserve Chairman Jerome Powell confirmed that the central bank will end its balance sheet reduction program this year. This just five months after insisting quantitative tightening was on “autopilot.”
“We’ve worked out, I think, the framework of a plan that we hope to be able to announce soon that will light the way all the way to the end of balance sheet normalization,” Powell said during testimony before the House Financial Services Committee.