Economist Peter Schiff warned that stagflation risks in the United States are mounting as economic growth slows while inflation pressures persist. U.S. GDP growth fell sharply in the second quarter from 4.4% to 1.4%, coming in well below expectations and signaling a rapid cooling in economic momentum.
At the same time, the PCE price index rose 0.4% in December, translating to an annualized pace near 5%, while the year-over-year reading increased to 2.9%, up from 2.7% in November. Core PCE also accelerated to 3%, compared with 2.8% a month earlier.
The combination of weakening output and firming inflation presents a challenge for policymakers. Markets have been anticipating interest rate cuts, but persistent price pressures could complicate the Federal Reserve’s timeline for easing.
Schiff argues that this dynamic reflects a classic stagflation setup, where slowing growth coincides with rising costs, increasing risks for both financial markets and consumer confidence heading into the next policy cycle.
