Wharton School economist Jeremy Siegel expects the Federal Reserve to cut interest rates significantly in the second half of 2023, possibly sparking a big stock market rebound.
"I don't think rates are going to remain higher. I think they're going to go down dramatically in the second half because of the weakening economy, the control over inflation," the professor emeritus of finance said on CNBC's "Squawk Box" Thursday. "I think that's what the market is looking forward to."
If the Fed brings down its discount rate, "the market'll say, 'Hey, a mild recession or even a moderate recession for a year, I'll take that.' That's why I think the market still has a good chance of giving that 10 to 15% gain, the forecast that I gave on Jan. 2," Siegel said.
The Fed on Wednesday slowed its rate-hiking pace by raising its benchmark rate by a quarter percentage point, with Chairman Jerome Powell acknowledging inflationary pressures have started to moderate while indicating the central bank anticipates further rate increases.
Siegel, who has sharply criticized the Fed over the past year for being late in responding to inflation and for aggressively raising rates when it did respond, appeared to take heart in Powell's latest comments.