The Federal Reserve's latest move to cutinterest rates and resume purchasing Treasury bills has ignited a fierce debate
over the trajectory of the U.S. economy.
While mainstream analysts are celebratingsigns of a “Goldilocks” softlanding, economist Peter Schiff is issuing a stark warning, branding the new
liquidity measures as a dangerous return to quantitative easing.
The ‘QE5’ Warning
Schiff took to social media platform Ximmediately following the decision, zeroing in on the Fed’s announcement that it would begin buying T-bills “on an ongoing basis.”
Rejecting the central bank‘s technical framing of the move as a liquidity stabilizer, Schiffargued, “QE by any other name is still inflation.”
He predicts the policy will backfire,causing long-term interest rates to rise rather than fall. “It won't be long before the Fed expands and extends QE5 tolonger-dated maturities,” Schiff cautioned, ending hiscritique with a rhetorical push toward hard assets: “Gotgold?”
Wall Street Sees ‘Goldilocks’
Schiff's bearish outlook stands in sharpcontrast to the optimism radiating from institutional investors.
Following the 25 basis point rate cut,Jeffrey Roach, Chief Economist for LPL Financial, declared that “Goldilocks is here.”
Roach pointed to the Fed’s updated Summary of Economic Projections, which shows higher growthexpectations and lower inflation forecasts for 2026, as evidence that the Fed
is successfully balancing its dual mandate.
Gina Bolvin, President of Bolvin WealthManagement, echoed this sentiment, suggesting the Fed is shifting from fighting
inflation to managing risk. She views the decision as an attempt to guide the
economy toward a soft landing without “oversteering.”
Liquidity and Leadership Uncertainty
The specific mechanism drawing Schiff’s ire is the Fed’s plan to purchaseapproximately $40 billion per month in shorter-maturity Treasuries.
Bill Adams, Chief Economist for ComericaBank, notes these “Reserve Management PurchaseOperations” are intended to smooth volatility inshort-term funding markets.
However, Adams also warned that the Fed isoperating in a “data vacuum”due to delayed economic releases and faces a looming leadership shakeup when
Chair Powell's term ends in May 2026.
As Chris Zaccarelli of Northlight AssetManagement noted, while the current mood is optimistic, that “rose-colored” view may fade if investorsrealize the path to lower rates is slower than anticipated.
Market Delivers Positive Returns In 2025So Far
The S&P 500 index has advanced 17.35%year-to-date, whereas the Dow Jones index returned 13.36% and the Nasdaq
Composite gained 22.68% in the same period.
The SPDR S&P 500 ETF Trust (NYSE:SPY)and Invesco QQQ Trust ETF (NASDAQ:QQQ), which track the S&P 500 index and
Nasdaq 100 index, respectively, closed higher on Wednesday. The SPY was up
0.66% at $687.57, while the QQQ advanced 0.41% to $627.61, according to
Benzinga Pro data.