Wharton University professor Jeremy Siegel says most inflation data are below expectations and the Fed’s hawkish outlook is at odds with economic reality

Jeremy Siegel

Professor Jeremy Siegel of the Wharton School of the University of Pennsylvania (right) participates in a panel discussion at the SkyBridge Alternatives (SALT) conference in Las Vegas, Nevada, May 9, 2012.Reuters/Steve Marcus

  • Jeremy Siegel said inflation was improving and the Federal Reserve’s hawkish views were at odds with the economy.

  • He said last month that 26 out of 27 inflation indicators were below expectations.

  • This could mean that the Fed won’t have to hike rates as many observers are hoping.

Federal Reserve Chairman Jerome Powell stressed at Jackson Hole that the central bank will not cut interest rates anytime soon and that sustained tightening is needed to keep inflation down. That contradicts what the data show, said Wharton University professor Jeremy Siegel. said in an interview with CNBC this week.

Of the 27 inflation measures recorded last month, 26 fell short of expectations, Siegel said. Most recently, the Institute for Supply Management’s price index fell 18.5 points from 78.5% in June, when he hit 60% in July. This is his fourth-largest drop ever recorded by the index and the biggest drop since the Great Recession.

He added that the CPI usually lags behind the actual decline in prices, and that property prices may have fallen as well, but that won’t be recorded for a while either.

In an interview with CNBC, Siegel said, “The news about inflation is real and it’s going very well. That’s why when Fed Chair Powell acted like things were getting worse and worse last Friday, I was like, ‘I don’t know. I was shocked,” he said.

Siegel had warned the economy could have an inflationary problem as early as 2020, but in recent months the central bank has risked tightening the economy too much, prompting the Fed to slow down rate hikes. I candidly say that there is At the Federal Open Market Committee meeting last September, half of FOMC members said they wouldn’t need to raise rates until 2022, and the most hawkish forecast was a 50-point rate hike, Siegel said. The Federal Reserve (Fed) has raised the effective federal funds rate by 150 points so far this year.

“So do they really have the ability to see the future? he said.

Siegel said the central bank will soon start slowing the pace of rate hikes.The current policy rate is between 2.25% and 2.5%.

“I don’t think they need to go higher than that, and they’re manipulating the market by saying, ‘We’re going to keep it high until 2023,’ when we don’t know what’s going to happen in 2023. It really wasn’t. It’s a good image to project,” he said.

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