Jeremy Siegel Warns of Economic Disaster if Fed Delivers Bigger Rate Hike

Jeremy Siegel, a top economist from the Wharton School at the University of Pennsylvania, recently warned of a potential economic disaster if the Federal Reserve delivers a rate hike higher than the 25 basis-point increase that markets are expecting.

Siegel noted that with so many people bearish on the market, the Fed needs to soften its policy to avoid a recession.^[0] If the Fed goes beyond the expected 25 basis-point increase, it could cause a disaster, he warned.

The Fed has already hiked rates 425 basis-points in the past year in an attempt to bring down inflation.^[1] While some have argued that the Fed should remain vigilant to prevent inflation from rebounding, Siegel believes that the shrunken money supply should prevent that from happening.^[2]

Siegel is not alone in his warnings.^[1] Many economists have expressed concern about the potential for a rate hike to cause an economic downturn. The FOMC meeting later this week will reveal whether the Fed heeds these warnings, or if it pushes forward with its plans to raise rates.

0. “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

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. “The Fed risks sparking a disaster, Wharton's Jeremy Siegel says” Markets Insider, 30 Jan. 2023, https://markets.businessinsider.com/news/stocks/jeremy-siegel-recession-warning-fed-inflation-disaster-interest-rate-hikes-2023-1