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August 11, 2022 at 02:23 PM
What You Need to Know
- The CPI looks backward, but real inflation looks better than the official government stats, Siegel said.
- Siegel suggests the Fed raise the benchmark interest rate by 50 basis points at its next meeting, then by 25 basis points each at the next two.
- He wants the Fed to be forward-looking on what’s going on in sensitive commodities and in the housing market.
Forward-looking inflation data points look better than official government inflation statistics and signal that the Federal Reserve can moderate its interest rate increases, according to Jeremy Siegel, finance professor at the University of Pennsylvania’s Wharton School.
Siegel, appearing on CNBC after the government released July’s consumer price index on Wednesday, noted that CPI data looks backward at inflation, while other information shows inflation is more moderate than the official statistics suggest.
The CPI was unchanged from June, when it increased 1.3% on a seasonally adjusted basis, and it rose 8.5% over the last 12 months before seasonal adjustment, according to the Bureau of Labor Statistics.
The Fed, seeking to curb high inflation, raised the benchmark interest rate by 75 basis points in July. Siegel suggested to CNBC the Fed should make more modest increases now.
“I would go 50 and then two 25s at this particular point, to complete market expectations,” he said.
The shelter index rose 0.5% in July, a slight moderation from the previous month, and rose 5.7% over the past 12 months, accounting for 40% of the increase in all items except food and energy over the year, according to BLS.
