The U.S. dollar is in the midst of its steepest annual decline in over five decades, triggering renewed inflation concerns among leading market experts.
Dollar Depreciation Sparks Inflation Concerns
On Monday, in a post on X, The Kobeissi Letter raised concerns regarding the depreciation in the U.S. Dollar throughout this past year. Citing data from Apollo Global Management, the post warned that this decline “will spark inflation.”
Citing data from the Federal Reserve's own model, the post said, “Every -10% drop in the US Dollar results in a 30 basis point boost to inflation.” That linkage has become more significant in recent months, with the U.S. Dollar Index (DXY) having already fallen more than 10% year to date, marking its “worst year since 1973,” according to the post.
“Position yourself accordingly,” the post concludes, underscoring the impact that this is set to have on equities, commodities and fixed income.
It said this while quoting another post discussing U.S. gold reserves, which exceeded $1 trillion in value for the first time, following the yellow metal’s 44% year-to-date rally.
Rate Cuts Will ‘Harm The Labor Market’
Economist Peter Schiff had raised similar concerns early this month, while arguing against the Federal interest rate cuts, saying that it could “harm the labor market,” instead of helping it. He said, “Rate cuts now will harm the labor market by weakening the dollar, driving up consumer prices, and pushing long-term interest rates higher,” in a post on X.
Former Treasury Secretary Lawrence Summers said last week that the U.S. could be on “the foothills of stagflation” as a result of President Donald Trump’s tariffs. “I think inflation will surprise a bit on the high side,” he said, hinting that price pressures might outpace current expectations.
The U.S. Dollar Index (DXY) is down 0.07% on Tuesday, trading at 97.882. Gold spot price is up 1.10%, trading at 3,868.37 per ounce, continuing to touch new record highs.
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