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Yahoo
2 days ago
- Business
- Yahoo
Top economist warns America is heading toward economic disaster the Fed can't fix
Euro Pacific Asset Management Chief Economist Peter Schiff voiced some criticism of the Federal Reserve and sounded the alarm about the economy during an appearance Wednesday on "The Claman Countdown." Schiff's comments on the show came not long after the Federal Open Markets Committee (FOMC) wrapped up its latest meeting in the afternoon, electing to keep the central bank's benchmark interest rate at its current level. Federal Reserve Chain Jerome Powell subsequently gave remarks to the media about the decision. Schiff told host Liz Claman the "biggest takeaway is that Powell basically admitted that they have no idea what's going to happen." Federal Reserve Leaves Key Interest Rate Unchanges For Fourth Straight Meeting "They don't really know what's going to happen to consumer prices. They don't know what's going to happen to employment," Schiff argued. "I don't even think their forecasts are educated guesses so much as wishful thinking." Read On The Fox Business App The benchmark federal funds rate will stay at a current range of 4.25% to 4.5% after the Fed's latest decision. FOMC policymakers also released a summary of economic projections, known as the so-called "dot plot," which showed members anticipate two interest rate cuts in 2025, followed by one cut each in 2026 and 2027. They also project PCE inflation will rise to 3% this year before declining to 2.4% in 2026 and 2.1% the following year. Real gross domestic product (GDP) is seen as slowing to 1.4% in 2025 before growth picks up to 1.6% next year and 1.8% in 2027. Unemployment is seen as rising to 4.5% in 2025 and 2026, before dipping to 4.4% in 2027. Schiff said he thought inflation will be "a lot higher" than the Fed expects and that the U.S. economy will be "a lot weaker." He acknowledged the Fed "brought their inflation forecast up a bit" for the near-term and "their growth forecast down" but added that such changes weren't "big enough." According to Schiff, the "big problem" for inflation is "all of the inflation chickens that the Fed has been releasing for more than a decade are coming home to roost" rather than the Trump administration's recent spate of tariffs on imports from foreign countries. "We have a lot of dollars sloshing around the world thanks to years and years of artificially low interest rates and quantitative easing, and more of those dollars are going to be coming home as foreigners get out of U.S. financial asset," Schiff told Claman. "You're seeing a global exodus out of U.S. stocks, out of U.S. bonds, and all that cash is going to come back home, bidding up prices." Schiff predicted the U.S. will experience stagflation "with a recession and much higher inflation happening at the same time, really complicating the defense ability to try to do something about either problem." Lower interest rates will not help the U.S. economy, he also argued, labeling them as the "cause." "The solution involves much higher interest rates," he said. "Now, I understand that's going to be very painful, given the economy that we've created, built on a foundation of cheap money." Trump Slams 'Stupid' Fed Chair Powell Ahead Of Interest Rate Decision "It means stock prices come down, real estate prices go down, companies fail," he added. "There's going to be bankruptcies. There's going to be defaults. There's going to be a protracted recession, probably a much worse financial crisis than 2008, but all that has to happen because the alternative to that is even worse." The U.S. is on the path to "runaway inflation" that could become "hyperinflation," Schiff predicted. The latest meeting of the FOMC was the fourth time it has gotten together this year. The FOMC also chose not to change the rate at the three previous meetings in January, March and May. In late May, the personal consumption expenditures Index showed a 0.1% month-over-month and a 2.1% year-over-year increase in inflation for April. Eric Revell contributed to this article source: Top economist warns America is heading toward economic disaster the Fed can't fix
Yahoo
2 days ago
- Business
- Yahoo
Fed Foresees Stagflation, Higher Interest Rates Ahead
The Federal Reserve officials stuck to their interest rate expectations this week, but shifted their economic outlook in their latest economic projections. The Federal Reserve Open Markets Committee's economic projections showed that the central bank is likely to cut interest rates two more times, or half a percentage point, throughout the rest of the year. The projections line up with similar forecasts in March and late last year. However, not everything is the same as in prior projections. The Fed forecast shows unemployment and inflation rising higher than officials previously thought. The projection underscores the Fed's reasoning behind its wait-and-see approach. Despite the inflation rate coming closer to its annual target of 2%, the Federal Reserve held rates at their current level of 4.25% to 4.50% on Wednesday. 'The summary forecasts that were published today imply that the FOMC sees a bit more stagflation than it did in March,' said Wells Fargo Chief Economist Jay Bryson. What it says: More officials forecast unemployment moving higher in 2025, with most now projecting an unemployment rate of between 4.4% and 4.5% this year, sending the median projection up to 4.5%. The unemployment rate stayed at 4.2% in May, recent data showed. Officials see unemployment staying around 4.5% in 2026 and 2027. Both projections are higher than the March forecast. What it means: Officials don't see a breakdown in the labor market ahead, though joblessness may tick higher than previously expected. With a solid labor market helping keep the economy strong, Fed officials see more time available to them to keep interest rates high in order to get the Personal Consumption Expenditures (PCE) inflation rate back to its 2% target. 'From the Fed's perspective, substantial ongoing uncertainty paired with a good-enough-for-now labor market is ample justification to continue its wait-and-see approach,' said Indeed Senior Economist Cory Stahle. What it says: Inflation will get worse before it gets better. Fed officials now see the median PCE inflation rate moving to 3% in 2025, higher than the median rate of 2.7% forecasted in March. Projections for 2026 and 2027 were also higher than the March forecast and showed that officials expected inflation to remain above the Fed's goal of 2%. What it means: Officials are likely factoring in expected price increases from tariffs, resulting in higher inflation over the next few years. While the Fed's projections indicate that price pressure may persist, it wasn't enough for them to significantly reduce their interest rate projections. 'Their revised quarterly forecasts indicate they remain dovish and inclined to 'look-through' a temporary spike in inflation and cut interest rates by 50 [basis points] this year to support an anticipated weakening in economic activity," wrote Nationwide Chief Economist Kathy Bostjancic. What it says: The dot plot shows that FOMC members are divided on where interest rates are going. The top row shows that seven of the 19 members see interest rates remaining unchanged at 4.25% to 4.5% throughout the rest of the year. Another row of eight votes shows that the Fed will cut interest rates two more times to bring them down to 3.75% to 4%. Only four members foresee a different result for the Fed. When taken together, the average projects a half-percent interest rate cut this year. What it means: The results generally indicate that despite a declining inflation rate and continued strong job growth, more members are cautious about whether interest rates need to be cut at all. The dot plot shows that the number of members who don't believe the Fed will cut at all this year increased by three, while fewer projected that the Fed would cut by 50 basis points than in March. 'They don't seem to be in a hurry to cut rates, but appear open to doing so under the right conditions,' said eToro U.S. Investment Analyst Bret Kenwell. Read the original article on Investopedia
Yahoo
2 days ago
- Business
- Yahoo
Fed Is in a 'Policy Purgatory,' KPMG's Swonk Says
Diane Swonk, KPMG chief economist, reacts to the Federal Reserve's policy-setting Federal Open Market Committee's decision to leave rates unchanged. The FOMC voted unanimously to hold the benchmark federal funds rate in a range of 4.25%-4.5%. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 days ago
- Business
- Yahoo
Fed dot plot reveals more divided central bank, but still points to two rate cuts in 2025
The Federal Reserve's latest "dot plot" outlining future interest rate moves suggests the central bank will still cut rates twice this year, unchanged from its March outlook, though June's forecasts shows a more divided Fed weighing its next move on interest rates. The Fed announced Wednesday that it held its benchmark interest rate in a range of 4.25%-4.5%, as expected. This marked the fourth straight meeting the Fed kept rates unchanged since cutting rates by 0.25% back in December. Along with its policy announcement, the Fed released updated economic forecasts in its Summary of Economic Projections (SEP), including its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future. The central bank raised its projections for inflation and unemployment at the end of this year while lowering its forecast for economic growth. Fed officials see the fed funds rate falling to 3.9% this year, on par with its previous March projection. Coming into the decision, markets had priced in one to two additional rate cuts this year, according to Bloomberg data. The central bank slashed interest rates by a total of 100 basis points in 2024. It is yet to deliver rate cuts so far this year. In 2026, officials see one additional cut; in March, the Fed expected to cut rates twice next year. Twelve officials predict a rate cut this year, with two officials seeing a decrease of more than 0.5%. Most notable in Wednesday's dot plot were forecasts that showed seven FOMC members see no change in rates this year, signaling a more hawkish stance compared to March when four officials saw no change. Two FOMC members expect only one interest rate cut this year. The updated forecasts suggest the Federal Reserve will continue to take a cautious approach as officials attempt to understand the Trump administration's shifting trade narrative and other policy unknowns, such as the implications of the president's tax proposal. Meanwhile, fears over stagflation, a bleak economic scenario in which growth stalls, inflation persists, and unemployment rises have escalated since the start of the year — and Wednesday's projections continued to underscore that sentiment. The SEP indicated the Federal Reserve sees core inflation hitting 3.1% this year, higher than March's projection of 2.8%, before cooling to 2.4% in 2026 and 2.1% in 2027. The Fed also sees the unemployment rate rising to 4.5% this year, higher than its previous forecast of 4.4%. As of May, the unemployment rate stood at 4.2%. Unemployment is expected to remain at that level — 4.5% — through 2026 before ticking down to 4.4% in 2027. The Fed also downgraded its previous forecast for US economic growth, with GDP expected to grow at an annualized pace of 1.4% this year before reaching 1.6% growth in 2026 and 1.8% in 2027. In March, officials saw GDP growth at 1.7% this year before reaching 1.8% in 2026 and 2027. Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
2 days ago
- Business
- Yahoo
Fed dot plot reveals more divided central bank, but still points to two rate cuts in 2025
The Federal Reserve's latest "dot plot" outlining future interest rate moves suggests the central bank will still cut rates twice this year, unchanged from its March outlook, though June's forecasts shows a more divided Fed weighing its next move on interest rates. The Fed announced Wednesday that it held its benchmark interest rate in a range of 4.25%-4.5%, as expected. This marked the fourth straight meeting the Fed kept rates unchanged since cutting rates by 0.25% back in December. Along with its policy announcement, the Fed released updated economic forecasts in its Summary of Economic Projections (SEP), including its "dot plot," which maps out policymakers' expectations for where interest rates could be headed in the future. The central bank raised its projections for inflation and unemployment at the end of this year while lowering its forecast for economic growth. Fed officials see the fed funds rate falling to 3.9% this year, on par with its previous March projection. Coming into the decision, markets had priced in one to two additional rate cuts this year, according to Bloomberg data. The central bank slashed interest rates by a total of 100 basis points in 2024. It is yet to deliver rate cuts so far this year. In 2026, officials see one additional cut; in March, the Fed expected to cut rates twice next year. Twelve officials predict a rate cut this year, with two officials seeing a decrease of more than 0.5%. Most notable in Wednesday's dot plot were forecasts that showed seven FOMC members see no change in rates this year, signaling a more hawkish stance compared to March when four officials saw no change. Two FOMC members expect only one interest rate cut this year. The updated forecasts suggest the Federal Reserve will continue to take a cautious approach as officials attempt to understand the Trump administration's shifting trade narrative and other policy unknowns, such as the implications of the president's tax proposal. Meanwhile, fears over stagflation, a bleak economic scenario in which growth stalls, inflation persists, and unemployment rises have escalated since the start of the year — and Wednesday's projections continued to underscore that sentiment. The SEP indicated the Federal Reserve sees core inflation hitting 3.1% this year, higher than March's projection of 2.8%, before cooling to 2.4% in 2026 and 2.1% in 2027. The Fed also sees the unemployment rate rising to 4.5% this year, higher than its previous forecast of 4.4%. As of May, the unemployment rate stood at 4.2%. Unemployment is expected to remain at that level — 4.5% — through 2026 before ticking down to 4.4% in 2027. The Fed also downgraded its previous forecast for US economic growth, with GDP expected to grow at an annualized pace of 1.4% this year before reaching 1.6% growth in 2026 and 1.8% in 2027. In March, officials saw GDP growth at 1.7% this year before reaching 1.8% in 2026 and 2027. Allie Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at
