Wharton Professor Jeremey Siegel Says The Risk of Recession Is Greater Than Any “Waffling” on Inflation

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wharton professor jeremy siegel
wharton professor jeremy siegel

The ongoing debate over whether the Federal Reserve’s actions will result in a happy ending for the economy or bring the US into recession is soaring, with Jeremy Siegel stating on Monday that the risk of a downturn is now much higher than any “waffling” on inflation by the central bank. 

“The Fed’s tightening and their talk of super-tightening has just pushed markets way too extreme,” the top economist said in an interview with CNBC on Monday. “[It’s] so extreme I think the risk of recession is so much higher than waffling on inflation.”

The central bank has continued its aggressive rate hike campaign since inflation reached 9.1% this summer, with Fed Chair Powell promising to keep hiking rates until the “job is done.”  

After delivering another 75-point hike this month, stocks saw their most significant one-day decline in two years, and markets are now pricing in a policy rate of 4.75% in May of next year.

That’s too high, Siegel believes, considering that inflation is already starting to cool. He pointed out that official statistics — like the closely-watched Consumer Price Index — tend to lag behind actual inflation in the economy. Housing prices, which make up 50% of core inflation, are on the decline, as are commodity prices. Expectations for inflation two years from now are steadily declining.