Jeremy Siegel Changes View on Fed Interest Rate Cuts

Wharton School Professor Jeremy Siegel has shifted his stance on the necessity of an emergency interest rate reduction by the Federal Reserve, suggesting that while it may not be critical, swift action is still needed. Siegel, who serves as chief economist at WisdomTree, previously called for an immediate 0.75 percentage point cut, followed by another in September, as markets faced significant downturns amid recession fears and concerns over the Fed's slow response to easing policy in light of declining inflation rates. Recent positive economic data and a notable market rally have lessened the urgency for immediate cuts, prompting Siegel to reassess his earlier position. In a phone interview, he stated, "I no longer certainly think it's necessary. But I want [Powell] to move down to 4% as fast as possible." The Federal Reserve's decision on July 31 to maintain its key interest rate between 5.25%-5.5% faced criticism, particularly after a report indicated a rise in jobless claims and a contraction in the manufacturing sector. However, subsequent data showed a decrease in jobless claims and better-than-expected performance in the service sector, leading to a more optimistic outlook. Siegel acknowledged his intention to provoke discussion with his initial call for an emergency cut, emphasizing that monetary policy should ideally be adjusted to below 4%. He expressed concern that Fed Chair Jerome Powell's cautious approach could lead to missed opportunities for timely intervention in the current economic climate.