Peter Schiff’s Warning: Fed Reversal, Trump Inflation Clash, Silver Surge Signal Volatile 2026

The December 24, 2025 Kitco article [1] serves as the foundation for this analysis, outlining Peter Schiff’s concerns about the Fed’s policy pivot amid a political clash over inflation. On December 10, 2025, the FOMC cut its target federal funds rate by 25 basis points to 3.50–3.75% (the third cut of the year) and restarted $40B/month Treasury bill purchases to maintain “ample reserves,” ending the largest quantitative tightening (QT) cycle in history (balance sheet reduced to $6.5T) [2][4][5]. While the Fed avoided labeling the asset purchases as quantitative easing (QE), analysts noted they would have similar liquidity-injecting effects [4].

The Schiff-Trump clash emerged when Trump criticized Schiff on Truth Social, likely downplaying inflation amid November 2025 CPI data showing headline inflation at 2.7% year-over-year (YoY) and core inflation (ex-food/energy) at 2.6% YoY [8][9][10]. Schiff countered that Trump’s policies (large deficits, easy money) mirror inflationary practices of prior administrations, and the Fed’s current pivot will reignite inflation long-term [7].

A key market signal accompanying these developments is silver’s historic surge: the metal broke above $55/oz in late 2025 with ~120% YoY gains and topped $70/oz by December 24, 2025, driven by the Fed’s dovish policies and investor demand for inflation hedges [2][6]. JPMorgan and Morgan Stanley identified the Fed’s T-bill purchases as the primary driver of this December 2025 precious metals rally [5].

1. Divergence Between Political Messaging and Market Signals
   : The Schiff-Trump clash exposes a gap between official narrative (focused on recent inflation cooling) and market-based concerns (focused on long-term inflation risks from expansionary policies). A December 2025 YouGov poll found only one-third of Republicans strongly approved of Trump’s handling of inflation [8], indicating voter sensitivity despite official data.
2. Fed’s “Goldilocks” Dilemma
   : The central bank faces a precarious balance: easing policy to support economic growth while avoiding inflation overheating. A sudden inflation rebound could force painful rate hikes, potentially triggering a recession [2].
3. Precious Metals as Leading Indicators
   : The record silver (and gold) prices [2] align with historical patterns where precious metals rise amid monetary policy uncertainty and inflation fears, suggesting markets are pricing in future inflation risks despite current cooling.

• Inflation Resurgence
  : Schiff’s warning that the Fed’s asset purchases will expand the money supply and reignite inflation [7] remains a key risk. A rebound could erode household purchasing power, especially amid ongoing real-world price pressures (e.g., high food costs, credit card debt) [10].
• Market Volatility
  : Conflicting signals (rate cuts vs. inflation fears) could create volatility in equities and bonds [3].
• Political Fallout
  : A resurgence in inflation could erode Trump’s support ahead of the 2026 elections, particularly among voters struggling with affordability [8][10].
• Recession Risk
  : If inflation rebounds, the Fed may need to reverse course with aggressive rate hikes, potentially triggering a recession [2].

• Inflation Hedge Assets
  : Precious metals like silver and gold may continue to benefit if inflation concerns persist [2][5].
• Short-Term Rate-Sensitive Assets
  : Rate cuts could support growth in rate-sensitive sectors (e.g., real estate, consumer durables) in the near term [3].

• 2025 Fed Rate Cuts
  : September (4.00–4.25%), October (3.75–4.00%), December (3.50–3.75%) [10].
• November 2025 Inflation
  : 2.7% YoY (headline), 2.6% YoY (core CPI) [8][9][10].
• Silver Performance
  : 120% YoY gain in 2025; >$70/oz by December 24, 2025 [2][6].
• Fed Asset Purchases
  : $40B/month in T-bills, up to $200B by mid-2026 [4].

Information gaps include the exact content of Trump’s Truth Social posts, Schiff’s detailed links between specific Trump policies and inflation, and the Fed’s methodology to ensure T-bill purchases do not expand the money supply beyond reserve requirements.