Economist Jeremy Siegel Believes Fed Will Cut Interest Rates in Second Half of 2023
By Jeremy Siegel, an economist from the Wharton School, believes that the Federal Reserve will cut interest rates significantly in the second half of 2023, in response to cooling inflation, a weakening labor market, and the rising risk of recession.[0] The professor emeritus of finance believes that the Fed needs to soften its policy in order to avoid a recession, and that if it hikes rates higher than the market is expecting at the upcoming meeting, it could spark an economic disaster.
Siegel said that he has never seen so many people so bearish, and that as a result, the market is likely to do the opposite.[1] He believes that the Fed will raise rates by only 25 basis points at the FOMC meeting, and that if they choose to raise rates by 50 basis points, as they did in December, it could be a disaster for investors.[2]
The economist said that the market will be looking forward to the Fed lowering rates in the second half of the year. He believes that due to the slowdown in the economy, the fed funds rate should be reduced to 2-1/2%.[3] He also said that the shrinking money supply should prevent inflation from rebounding, and that if the Fed does not lower rates, there could be tremendous selling pressure for the risk markets, and a 1,000-point drop in the Dow.[1]
0. “Jeremy Siegel Expects Rate Cut, Stock Surge in Second Half of 2023” ThinkAdvisor, 2 Feb. 2023, https://www.thinkadvisor.com/2023/02/02/jeremy-siegel-expects-rate-cut-stock-surge-in-second-half-of-2023
1. “Wharton professor Jeremy Siegel says the Fed risks sparking a disaster if it hikes rates higher than markets a” Business Insider India, 30 Jan. 2023, https://www.businessinsider.in/stock-market/news/wharton-professor-jeremy-siegel-says-the-fed-risks-sparking-a-disaster-if-it-hikes-rates-higher-than-markets-are-expecting-at-its-upcoming-meeting/articleshow/97454517.cms
2. “Wharton professor Jeremy Siegel warns the Dow could drop 1,000 points ‘immediately’ if the Fed goes too big with its next rate hike” Yahoo Sports, 31 Jan. 2023, https://sports.yahoo.com/wharton-professor-jeremy-siegel-warns-214321599.html
3. “Fed Must Do 2 Things To Maintain S&P 500 Rally Or ‘No Way That Stocks Are Going to Make It': Jeremy Siege” Benzinga, 29 Jan. 2023, https://www.benzinga.com/news/23/01/30615269/fed-must-do-2-things-to-maintain-s-p-500-rally-or-no-way-that-stocks-are-going-to-make-it-jeremy-sie
