Obama-Era Economist Jason Furman Warns Fed's Inflation Outlook May Be Too Optimistic — Peter Schiff Slams Powell's Strategy Amid National Debt Concerns

Leading economists offered contrasting views on Thursday after the Federal Reserve’s 25-basis-point rate cut, with some warning of persistent inflation risks while others supported the central bank’s gradual easing approach.

What Happened: Jason Furman, a key figure in 44th U.S. President Barack Obama’s administration expressed skepticism about the Fed’s balanced risk assessment, pointing to concerning inflation indicators.

“Core PCE inflation is 2.7% (above target),” Furman noted on X, warning that inflation could climb to “2.8% or possibly even 2.9%.” He suggested this trend could complicate the Fed’s planned rate reduction schedule unless labor markets weaken significantly.

In most predictable event of the week, the Fed cut by 25bp.

Monetary policy is going from very contractionary to reasonably contractionary.

Makes sense given that inflation risks much lower than before but are still (contra the committee statement) higher than recession risks.

— Jason Furman (@jasonfurman) November 7, 2024

Economist Peter Schiff delivered sharp criticism of Fed Chair Jerome Powell‘s inflation-targeting strategy, citing structural challenges.

“The Fed cut interest rates by 25 basis points, claiming they’re confident they’ll achieve their long-term inflation target of 2%,” Schiff wrote on X. “Powell can’t possibly believe that, considering a $36 trillion National Debt and the prospect of 2025 tax cuts sending demand and deficits soaring.”

The #Fed cut interest rates by 25 basis points, claiming they're confident they'll achieve their long-term #inflation target of 2%. #Powell can't possibly believe that, considering a $36 trillion #NationalDebt and the prospect of 2025 tax cuts sending demand and deficits soaring.

— Peter Schiff (@PeterSchiff) November 7, 2024

Wells Fargo struck a more moderate tone, with strategist Luis Alvarado telling Yahoo Finance they expect “another [cut] in December,” while maintaining flexibility about 2025 policy adjustments.

Why It Matters: The Fed’s decision, which lowered rates to 4.5%-4.75%, came amid robust economic indicators including 2.8% second-quarter GDP growth. Powell dismissed October’s weak employment data as temporary, citing strikes and weather disruptions.

Markets responded modestly to the day’s events, with the U.S. Dollar Index dipping 0.07% to 104.44 and the 10-year Treasury yield inching up to 4.353%.

The SPDR S&P 500 ETF (NYSE:SPY) closed at $595.61, up 0.77%, with a modest after-hours increase of 0.02%. The iShares Russell 2000 ETF (NYSE:IWM) finished at $236.38, down 0.35%, though it rose 0.15% in after-hours trading.

The S&P 500 gained 0.74%, reaching a record high of 5,973.10, while the Nasdaq advanced 1.51% to 19,269.46, marking its first close above 19,000. The Dow Jones Industrial Average was largely unchanged, ticking down by less than one point to end at 43,729.34.

S&P 500, Dow, and Nasdaq 100 futures were flat. On the currency front, the Japanese Yen held steady at $0.0065, while the Euro slipped by 0.11% to $1.0788.

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Federal Reserve illustration created using artificial intelligence via MidJourney.

Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors.

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