Wharton professor Jeremy Siegel no longer believes that the US Federal Reserve needs to make an emergency interest rate cut, but still wants policymakers to cut interest rates quickly and strongly.
Siegel caused a stir on Monday when he said Fed Chairman Jerome Powell and his colleagues should immediately implement a 0.75 percentage point rate cut, followed by another cut in September.
Professor Jeremy Siegel
The comments came as markets plunged on fears of a recession and concerns that the Fed was moving too slowly to ease policy while inflation slowed. However, subsequent positive data and a strong market rally on Thursday appeared to have lessened the urgency.
“I no longer think it’s necessary. But I want Powell to get to 4% as quickly as possible,” Siegel said in a phone interview. “Is it bad? No. But is it necessary? No, not right now.”
On July 31, the Fed voted to keep its key interest rate at 5.25%-5.5%, a decision that was quickly criticized when a report the next day on weekly jobless claims showed a spike and a manufacturing index showed the sector continued to shrink.
However, data on Thursday showed jobless claims fell from the previous week, and the services index also came in better than expected at the start of the week.
“Obviously, I want to draw attention,” Siegel said of his call for a mid-meeting rate cut. “There’s no way he’s going to do that without something breaking. I don’t think things are breaking. But by all the criteria and the monetary rules … they should be below 4%.”
Market forecasts suggest the Fed will cut by at least a quarter of a percentage point in September and possibly a full percentage point by the end of 2024. However, those expectations have fluctuated as investors watch how much the Fed thinks it needs to ease policy.
An emergency cut in this situation “is simply not the way Jay Powell does things,” Siegel said. “But Jay Powell has been too slow, certainly in raising rates, and I just want to make sure he doesn’t make the same mistakes in cutting rates.”
Source: https://tapchibitcoin.io/professor-jeremy-siegel-withdraws-from-call-for-fed-cat-to-reduce-emergency-suat.html
