Peter Schiff Questions Fed's September Rate Cut as Inflation Risks Linger

Peter Schiff, chief economist at Euro Pacific Capital, has cast doubt on the widely anticipated September rate cut by the Federal Reserve, warning that inflation may remain higher than expected, potentially influencing the central bank to act with greater caution [1]. In his recent remarks, Schiff emphasized that while the market is pricing in a rate reduction, the Fed is likely to prioritize the latest inflation data and ensure that any easing is backed by a clearer and sustained decline in price pressures [2]. He argued that the recent rise in equity markets, driven by expectations of a rate cut, may paradoxically make such a move less likely, as it signals stronger economic resilience and inflation persistence [1].

Schiff’s skepticism highlights the ongoing uncertainty in the economic landscape, where the path of inflation is seen as more resistant to traditional monetary tightening than previously expected. He questioned the reliability of core inflation metrics as a guide for policy, suggesting that broader economic forces may not be fully reflected in official data [3]. This perspective aligns with those who believe the Fed should remain data-dependent and avoid locking into a predetermined policy timeline [1].

The economist pointed to historical precedents indicating that central banks tend to delay rate cuts until there is robust evidence of disinflation, particularly given the Fed’s dual mandate of maintaining price stability and maximum employment [1]. This approach means policymakers must carefully balance the risk of premature easing with the threat of renewed inflationary surges. Schiff’s analysis suggests that the Fed could still consider further tightening if incoming data fails to show meaningful progress in curbing inflation.

As the market braces for the Federal Reserve’s September meeting, Schiff’s comments underscore the data-sensitive nature of central bank decisions. The possibility of a delayed cut could have significant implications for financial markets, including equities and fixed-income instruments that have already priced in aggressive easing [3]. His remarks reinforce the idea that market expectations do not always dictate policy outcomes and that the Fed’s actions will ultimately hinge on real-time economic performance.

[1] Euro Pacific Capital

[2] Bloomberg Financial Markets Analysis

[3] Wall Street Journal Commentary on Inflation Dynamics