Peter Schiff Calls Out Jerome Powell Over Rate Cut Reversals: Fed Chair Knows 'CPI Will Never Return To 2%'

Peter Schiff, a well-known economist, criticizes Federal Reserve Chair Jerome Powell for his apparent shift in stance on interest rate cuts. This comes after recent Federal Reserve meetings signaling potential rate reductions.

What Happened: On Tuesday, Schiff took to X, formerly Twitter, to express his views on Powell’s change in stance. He noted that in the November press conference, Powell stated that the Federal Open Market Committee (FOMC) wasn’t contemplating reducing interest rates. However, in the latest conference, not only did Powell discuss rate cuts but it seemed like FOMC members have been considering cuts for a while.

Schiff said that Powell “opened the door to a return to QE [Quantative Easing].”

In the context of the Federal Reserve’s last meeting of 2023, Powell acknowledged that the current interest rate is likely at its peak and further increases could put downward pressure on economic activity and inflation.

See Also: Fed Holds Rates Steady, Signals End To Hiking Cycle; Projects Interest Rates Falling To 4.6% By Year-End

Why It Matters: Notably Schiff also touched on Fed’s inflation target of 2% separately. He said that Powell admitted that the Federal Reserve doesn’t see the Personal Consumption Expenditures Price Index returning to the 2% mark until 2026.

“But the PCE is not the #CPI, and is the official measure that most understates the true #inflation rate. Powell is using the PCE as his benchmark as he likely knows the CPI will never return to 2%,” said Schiff.

Schiff’s tweet highlights a significant shift in the Federal Reserve’s policy. After a series of interest rate hikes, the Federal Reserve’s decision to hold rates steady, coupled with a dovish shift in economic projections, sparked mixed reactions from financial experts and economists.

Previously in November, Peter Schiff warned of a potential surge in inflation, attributing it to a rally in the U.S. dollar. This recent tweet seems to continue his critique of the Federal Reserve’s handling of monetary policy.

Photo Courtesy: Wikimedia Commons

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