Wharton’s Jeremy Siegel accuses Fed of making one of the biggest policy mistakes in its 110-year history

“I think we’re giving Powell too much credit. … The last two years are one of the biggest policy mistakes in the 110-year history of the Fed by staying so easy when everything was booming.”

-Jeremy Siegel

Wharton professor Jeremy Siegel has a bone to pick with Federal Reserve Chairman Jerome Powell.

The longtime market guru and frequent CNBC guest unleashed a memorable rant Friday as U.S. stocks tumbled.

He argued that the Fed made a massive policy mistake last year by not tightening monetary policy before inflation got out of hand, and mocked the Fed and Powell for insisting that inflation ‘it would quickly fade away on its own.

And now, Siegel said, the Fed is making another mistake by raising interest rates and tightening monetary policy too aggressively.

“When we had all the commodities rising at rapid rates, Chairman Powell and the Fed said, ‘We don’t see any inflation. We do not see the need to increase interest rates in 2022”. Now, when all those same commodity and asset prices are falling, he says, “Stubborn inflation that requires the Fed to stay tight throughout 2023.” It makes absolutely no sense to me,” Siegel told CNBC’s “Halftime Report.”

As a result of all this, he said, the central bank is making middle- and working-class Americans pay for what it hopes will be a punishing recession.

Instead of continuing to raise rates until inflation eases toward the central bank’s 2 percent target, Siegel said the Fed should let falling commodity prices bear more of the burden of the fight. against inflation. Crude oil prices have fallen sharply from highs reached earlier this year, with West Texas Intermediate CLX22 crude,
fell $4.75, or 5.7%, to settle at $78.74 a barrel on Friday on the New York Mercantile Exchange, its lowest settlement since Jan. 10.

“I think the Fed is too tight,” Siegel added. “They’re making the exact same mistake on the other side as they were a year ago.”

The Wharton professor also criticized the Fed for trying to raise the unemployment rate. He said workers aren’t driving inflation with higher wages, they’re just trying to catch up.

Siegel’s rant caught the attention of the CNBC audience, with many taking to Twitter to agree with his assessment that the Fed was wrong to keep policy too loose for too long.

One Twitter Inc. TWTR,
The user said that the last three years of Fed policy will probably not be well regarded by historians.

Another praised Siegel for bringing the “rage.”

And a third joked that maybe Siegel and Powell should face off live.

Of course, Siegel isn’t the only market guru to argue that the Fed has made a huge policy mistake.

Stocks ended strongly lower on Friday as all three benchmarks posted losses for the week, with the S&P 500 SPX,
up 1.7% to close Friday at 3,693.23, just above its lowest close of the year, which it hit in June. The Dow DJIA,
it wasn’t so lucky, with the blue-chip gauge hitting its lowest close of the year at 29,590.41. The Nasdaq Composite COMP,
it fell 198.88 points, or 1.8%, to 10,867.93.

Reads: Dow sinks 550 points as rising bond yields hammer stocks after Fed rate hike

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