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

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“I think we give Powell too much credit. …The past two years have been one of the biggest policy mistakes in the Fed’s 110-year history for 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 guest on TUSEN unleashed a momentous rant on Friday as US stocks plunged.

He argued that the Fed made a huge policy mistake last year by not tightening monetary policy before inflation spiraled out of control, and he mocked the Fed and Powell for insisting that inflation would soon disappear on its own.

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

“As we rapidly increased all commodities, Chairman Powell and the Fed said, ‘We don’t see inflation. We see no need to raise interest rates in 2022.” With all those same commodity and asset prices falling, he says, “Inflation intractable that should keep the Fed tight through 2023.” I absolutely don’t feel like it,” Siegel said in TUSEN’s “Halftime Report.”

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As a result of all this, he said, the central bank is making working and middle-class Americans pay with what it expects to be a debilitating recession.

Rather than continue raising interest rates until inflation declines toward the central bank’s 2% target, Siegel said the Fed should let falling commodity prices take more of the inflation control burden. Crude oil prices have fallen sharply from their highest level earlier this year, with West Texas Intermediate crude CLX22,
-4.86%
fell $4.75, or 5.7%, to settle at $78.74 a barrel on the New York Mercantile Exchange Friday, its lowest price since Jan. 10.

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“I think the Fed is just way too tight,” Siegel added. “They, on the other hand, are making the exact same mistake as they were a year ago.”

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

Siegel’s diatribe caught the attention of the TUSEN public, with many on Twitter agreeing with his assessment that the Fed had made a mistake by keeping policy loose for too long.

A Twitter Inc. TWTR,
+0.43%
user said the past three years of Fed policy will probably not be well regarded by historians.

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Another praised Siegel for bringing the “anger.”

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

Of course, Siegel is not the only market guru to argue that the Fed has made a major policy mistake.

Shares ended sharply lower Friday as all three benchmarks posted losses for the week, with the S&P 500 SPX,
-1.72%
fell 1.7% to close out Friday’s session at 3,693.23, just above the year’s low reached in June. The Dow DJIA,
-1.62%
wasn’t so lucky, with the blue chip meter hitting its lowest closing level of the year at 29,590.41. The Nasdaq Composite COMP,
+2.62%
fell by 198.88 points, or 1.8%, to 10,867.93.

Read: Dow drops 550 points as rising bond yields swallow stocks after Fed rate hike

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