Peter Schiff: “US Inflation Will Rise Further”… Warns of Market and Economic Collapse if Fed Truly Tightens

▲ Peter Schiff ©

A warning has emerged that the U.S. inflation rate is already excessively high and could rise further, and if the Federal Reserve (Fed) embarks on full-scale tightening to curb it, both the financial market and the real economy could be simultaneously impacted.

According to crypto-specialized media Finbold on July 29 (local time), Peter Schiff, Chief Economist and Global Strategist at Euro Pacific Asset Management, diagnosed that U.S. inflation is excessively high and highly likely to rise further. He pointed out that even if the Fed raises the benchmark interest rate by 25 or 50 basis points, it would be “too little, too late” to change the inflation trend.

With the current benchmark interest rate range at 3.50-3.75%, Schiff argued that even an increase of 0.25-0.50 percentage points would still leave monetary policy at a level that tolerates inflation. He explained that simple interest rate hikes are insufficient, and the Fed must reduce the money supply and shrink its balance sheet to curb inflation.

The U.S. broad money supply, M2, surpassed $23.29 trillion in July, setting a new all-time high. Previously, the Fed had warned that the artificial intelligence (AI) boom contributed to persistent inflation. Schiff emphasized that it is difficult to control inflation with only minor interest rate hikes when the money supply continues to expand.

However, Schiff believes that it is not easy for the Fed to actually undertake strong tightening to curb inflation. He warned that full-scale inflation-fighting measures could collapse financial markets and the economy, ultimately forcing the Fed to reverse its policy direction. This suggests the Fed is maintaining a precarious balance between price stability and the risk of harming financial markets and economic growth.

On the decentralized prediction market Polymarket, the probability that the Fed will not cut the benchmark interest rate even once in 2026 was reflected as 87.6%. The likelihood of an interest rate hike within this year also reached 77%. While the market views the possibility of Fed tightening as high, Schiff raised the dilemma that limited hikes would make it difficult to curb inflation, and strong action could lead to market collapse.

*Disclaimer: This article is for investment reference only, and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*