On July 29, Peter Schiff, chief economist at Euro Pacific Asset Management, warned that US inflation remains stubbornly high and is likely to climb further.
He argued on X that the Federal Reserve’s planned interest rate increases of 25 or 50 basis points, moving from 3.50% to 3.75%, won’t be enough to curb inflation. Schiff says these hikes are too small and too late to make an impact, as the rates will still allow inflationary pressures to persist.
Inflation is not just a matter of rate changes, he added. The Fed needs to tackle the problem by shrinking the money supply and reducing its balance sheet. Official data showed that the US M2 Money Supply hit a new all-time high of over $23.29 trillion in July, indicating that money is still flooding the economy.
Schiff’s concerns echo the Fed’s previous caution that the rise of artificial intelligence has contributed to ongoing inflationary trends. The central bank may face tough decisions ahead, as attempting to aggressively fight inflation risks triggering a market crash and damaging the economy. Schiff warned that such a scenario could force the Fed to reverse course.
Market participants are currently betting against Fed rate cuts in 2026 with an 87.6% probability, while the chance of another rate hike this year stands at 77%, according to Polymarket data. Schiff sees the Fed walking a fine line between controlling inflation and avoiding financial instability.
This caution follows recent Fed decisions on rates that highlighted the challenges in balancing economic growth with inflation control.
This material is informational and should not be taken as financial advice.
