Peter Schiff’s latest tape is not a victory lap for a hawkish Fed. The Federal Reserve raised the funds rate 25 basis points to a 3.75 to 4 percent range. Markets had priced a 90 percent chance of that move.
Schiff’s point is that the committee still did not want the hike. “The Fed didn’t hike rates because it wanted to. They hiked rates because they had to, because they had no choice. So they did the minimum they could possibly get away with, a quarter point, meaningless in the scheme of things.”
At the start of the year, the consensus was cuts. Schiff himself thought the Fed would duck a hike even though he said a much larger one was needed. He changed that call in the last couple of weeks for a reason he has watched for years. “They don’t like to disappoint the markets. If the markets expect something, the Fed feels obligated to deliver.”
A 500 point Dow rally the day before gave the all clear. Had stocks been falling into the meeting, he thinks the hike might have vanished.
Kevin Warsh was asked whether the committee hiked because the market demanded it. Schiff did not expect an honest answer. “I believe that the Fed did not wanna hike rates. If the Fed wanted to hike rates, they would’ve done it at the last meeting.”
Three members had already voted to tighten then. The data, in his telling, was not suddenly worse. Tough talk filled the gap. Jackson Hole was “Rate hike. Rate hike.” Then nothing. “Words are cheap. We need action.”
Bond yields kept rising anyway. “The markets weren’t believing the talk.”
So they put on a show. A unanimous vote, not because everyone wanted higher rates, but to look united. A quarter point to prove seriousness. Schiff says they still did not put up enough. “25 basis points is not going to cut it. It is not going to win over inflation.”
His punchline on Warsh: “The only thing that Warsh was able to reduce was the length of the press conference. This was the shortest press conference they’ve had. I mean, he got out of Dodge pretty quickly.”
A hike large enough to break inflation would, in this argument, break the economy and Treasury funding. That is why they will not do more.Investors had sold themselves a fairy tale that the hike would pull long yields down.
Schiff called that “wishful thinking at best” and “be careful what you wish for.”
After the announcement the Dow gave back a roughly 600 point slide after sitting green, and the 10 year pushed back above 5 percent, which he treats as a step toward 6.
He also walks through Trump’s push for rates under 1 percent, Scott Bessent’s testimony, why he thinks 8 percent mortgages are coming, import shock from tariffs, and why he expects gold to recover this selloff fast.The quarter point was the smallest door the Fed could walk through after months of talk stopped working.
Schiff closes arguing that The Fed’s tiny hike will not stop the bond market, the dollar problem, or what is already in motion for housing:
