Economist Peter Schiff Warns Fed May Be Committing Mistake By Lowering Rates In September As Dollar Index Falls To Lowest In Over A Year

As the dollar softens ahead of anticipated Fed rate cuts, economist Peter Schiff reiterated his concerns about a weaker dollar fanning inflationary pressure.

What Happened: The U.S. dollar fell to a low of 0.8408 (intraday) against the Swiss franc on Tuesday, the lowest since 0.8400 hit on Jan. 1. On a closing basis also, the greenback dropped to its lowest in eight months, as it ended at 0.8415 against the franc.

However, Schiff mentioned in his post that the Swiss currency fell to its lowest in 13 years.

The dollar weakness suggests that the anticipated September rate cut could be a mistake, said Schiff in a post on X, formerly Twitter.

The U.S. dollar just hit a 13-year low against the Swiss franc, another sign that the #Fed's planned Sept. rate cut is a mistake. Monetary policy is too loose. The Swiss franc is leading the #dollar lower, which means Americans will soon be paying much higher consumer prices.

— Peter Schiff (@PeterSchiff) August 27, 2024

The dollar index, which is an index measuring the performance of the dollar against a basket of major currencies, fell to a low (intraday) on Tuesday, lowest since the 100.02 on July 19, 2023.

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Why It’s Important: The Fed’s premise for moving toward a rate cut is the slowdown in inflationary pressure that has eased significantly from the 9%+ peak seen in June 2022. With the dollar moving lower in recent sessions, it could be a factor that could push up inflation, according to Schiff.

“The Swiss franc is leading the #dollar lower, which means Americans will soon be paying much higher consumer prices,” he said. The franc is considered to be a safe haven along with the yen.

A weaker currency pushes up import prices as more of that currency may be needed for purchasing a particular unit of a good relative to what might have been needed when the currency was weaker. This in turn pushes consumer prices higher, straining a segment that accounts for two-thirds of economic activity.

Schiff incidentally warned last week of the dollar potentially collapsing, resulting in serious consequences.

The Invesco DB US Dollar Index Bullish Fund UUP ended Friday’s session down 0.32% to $27.93, according to Benzinga Pro data.

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