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November 10, 2022 at 07:58 PM
What You Need to Know
- Siegel expects the Federal Reserve to raise rate 50 basis points next month, then pause.
- The Fed doesn't need to raise rates at all now, he said.
- A month's worth of economic data will be posted before the next Fed meeting, the economist noted.
Cooling inflation could set the stage for a year-end stock market rally and signals that the Federal Reserve should stop raising interest rates, Wharton School economist Jeremy Siegel said Thursday as new consumer price data sparked a major surge in equities.
Siegel, a guest on CNBC’s “Halftime Report,” said the Fed probably will raise the benchmark interest rate another 50 basis points next month and then pause, although the central bank doesn’t need to hike interest any further now.
“Inflation is basically over,” Siegel said, adding that core inflation would be lower if the Fed relied on the actual home and rental price index rather than lagging data calculated into the Consumer Price Index.
The CPI climbed a seasonally adjusted 0.4% in October and 7.7% from a year earlier before seasonal adjustments, moderating more than expected; the index rose 8.2% year over year in September.
“This is what we’ve been talking about for the last three months, that inflation is much lower than the Fed thinks,” Siegel said. The emeritus professor has sharply criticized the Fed for being late in responding to rising inflation last year and then aggressively raising interest rates this year to tame rising prices, based on lagging data.
“We’re in negative inflation mode if the Fed uses the right statistics, not the faulty statistics that they’ve been using,” he said on CNBC.
