Peter Schiff, chief economist at Euro Pacific Asset Management, recently criticized the Fed's policies harshly, warning that inflation will rise further in the coming year, potentially bringing long-term negative impacts to the U.S. economy. Schiff expressed his concerns about the Fed's strategy strongly on social media platform X, arguing that its actions will exacerbate inflation issues and pointing out that future rate cuts are more likely motivated by the need to rescue asset markets and banks rather than genuinely controlling inflation.

Fed Rate Cuts: Underlying Concerns and Future Risks

The Federal Reserve recently lowered the benchmark interest rate by a quarter of a percentage point, marking the third rate cut this year. However, as the pace of rate cuts slows, the Fed's economic forecast for 2025 has also changed significantly. The Fed raised its inflation expectation for economic growth in 2025 from 2.1% to 2.5%, while adjusting its rate expectation from 3.4% in September to 3.9%.

Powell's Contradictory Statements: Slowing Rate Cuts and Inflationary Pressures

Fed Chair Powell defended in a press conference that the slowing pace of rate cuts is due to ongoing inflationary pressures. However, Schiff questioned Powell's statements, arguing that there is a clear inconsistency between the Fed's actions and words. Schiff pointed out that the Fed's earlier rate cuts were too hasty, and interest rates never reached a truly restrictive level. Further rate cuts now could exacerbate inflationary pressures rather than alleviate them.

'A 2% inflation target? Impossible to achieve'

Peter Schiff specifically rebutted Powell's optimistic forecast that inflation will return to the 2% target within two years. He firmly believes that the inflation rate will remain at elevated levels, and may even be higher than it is currently. 'Inflation cannot return to 2% in two years. It may be higher,' Schiff commented.

Deficits and Fiscal Policy: The Root Causes of U.S. Economic Instability

In addition to criticizing Fed policy, Schiff also warned about the ever-expanding fiscal deficit in the United States. According to the latest fiscal data, the U.S. government's deficit has surged to $624 billion in the first two months of fiscal year 2025, setting a record for the same period. Schiff believes that sustained high spending will drain the vitality of the U.S. real economy, potentially leading to long-term instability.

Challenges Facing Trump: A Fragile Economic Environment and Fiscal Risks

Schiff also predicts that the Trump administration may inherit a complex situation of economic stagnation and increasing financial risks. With Trump set to take office in January, he may face a fragile economic environment, struggling to cope with the pressures of deficits and economic downturn.

Trump's Policies and Economic Risks: The Dual Challenge of Energy Markets and Debt Issues

Schiff also criticized Trump's strategy in the international energy market, particularly Trump's suggestion for the EU to increase purchases of U.S. oil and gas. Schiff believes this will lead to a reduction in domestic energy supply in the U.S., thereby driving up energy prices and increasing the economic burden on households. Additionally, Schiff criticized Trump's proposed 'cost-cutting' policies during his campaign, arguing that such policies could allow Congress to increase debt without limits, exacerbating the debt crisis.

Conclusion: The Long-Term Impact of Fed and Government Strategies

Schiff's warnings are not unfounded. With the shift in Fed policy and the continuous expansion of the fiscal deficit, the challenges facing the U.S. economy in the coming years will become increasingly complex. Whether the Trump administration can bring about economic recovery remains to be seen. We will continue to monitor these economic changes and provide you with the latest analysis.

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