Jeremy Siegel abandons call for emergency Fed rate cut

2024-08-09 19:36:12

Jeremy Siegel

Scott Mullin

Wharton professor Jeremy Siegel no longer thinks it’s critical for the Federal Reserve to implement an emergency rate cut, but still wants policymakers to cut rates quickly and significantly.

WisdomTree chief economist Siegel caused a stir on Monday when he told CNBC that Federal Reserve Chairman Jerome Powell and his colleagues should immediately implement an emergency rate cut of 0.75 percentage point and cut rates again in September.

The comments came as markets were weighed down by recession fears and concerns that the Federal Reserve was easing policy too slowly amid slowing inflation. However, positive data since then and Thursday’s strong market rebound have apparently eased that sense of urgency.

“I no longer think it’s necessary. But I hope [Powell] Get rates down to 4% as quickly as possible,” Siegel said in a phone interview. “Will that be bad? No. But is it necessary? No, it’s not necessary yet.”

The Fed voted on July 31 to keep its benchmark interest rate between 5.25% and 5.5%, but the decision was immediately criticized after the weekly jobless claims report released the next day showed a further contraction in the U.S. manufacturing index.

However, data on Thursday showed that the number of initial jobless claims fell from the previous week, and service sector data earlier in the week also beat expectations.

“Obviously, I want to change things,” Siegel said of his call for action during the meeting. “He can’t do it without things collapsing. I don’t think things are collapsing. But by all standards and all rules of money … rates should be below 4%.”

Markets expect the Fed to cut rates by at least a quarter point in September and possibly a full percentage point by the end of 2024. However, those expectations have been shaky as investors focus on how quickly the Fed eases policy.

Siegel said an emergency rate cut in this case “is not Powell’s style. But Powell was so slow to act, especially in the process of raising rates, and I just want to make sure he doesn’t make the same mistake in the process of lowering rates.”

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