Peter Schiff warns Fed rate cuts may not lower borrowing costs

Economist Peter Schiff has expressed concerns regarding the Federal Reserve's anticipated rate cuts, suggesting they may not effectively lower borrowing costs. He believes that mortgage rates have likely reached their lowest levels and are poised to increase. Schiff predicts that the Fed may resort to quantitative easing to counteract rising rates, which he warns could lead to a decline in the dollar's value and a resurgence of inflation. He proposed a potential 100 basis points rate hike and an expansion of quantitative tightening as measures to address these issues. The Federal Open Market Committee is set to convene on September 18, where discussions about the size of the expected rate cut will take place. Current speculation among investors leans towards a 50-basis-point reduction, with a 65% probability indicated by CME Group's FedWatch tool. This meeting is particularly significant as it comes amid a backdrop of high federal funds rates, currently at 5.3%, the highest in two decades. Political figures, including Senators Elizabeth Warren, Sheldon Whitehouse, and John Hickenlooper, have advocated for a 75 basis points cut, reflecting concerns about economic growth. Additionally, former President Donald Trump has voiced opposition to any rate cuts before the upcoming 2024 presidential election, adding to the complexity of the situation. Analysts are divided on the potential impact of rate cuts on the stock market, suggesting that the Fed's actions may be more reactive to economic conditions rather than proactive measures aimed at stimulating growth. This uncertainty surrounding the Fed's decisions has created a focal point for market participants, who are closely monitoring the upcoming meeting for insights into future monetary policy.