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

“I think we praise Powell a lot. …the past two years have been one of the biggest policy mistakes in the 110-year history of the Federal Reserve by staying too easy when everything was booming.”


– Jeremy Siegel

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

Longtime market expert and frequent guest on CNBC made an unforgettable rant on Friday as US stocks plunged.

He argued that the Fed made a huge policy mistake last year by not moving to tighten monetary policy before inflation got out of control, and he mocked the Fed and Powell for insisting that inflation would quickly vanish on its own.

Now, Siegel said, the Fed is making another mistake by raising interest rates and tightening monetary policy too hard.

“When all commodities rose at rapid rates, Chairman Powell and the Federal Reserve said, ‘We don’t see any inflation. We don’t see any need to raise interest rates in 2022.” Now when all those same commodities and asset prices are down, he says, “stubborn inflation that requires the Fed to stay tight all the way through 2023,” Siegel said on Halftime Report. On CNBC, “It makes no sense to me at all.”

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

Instead of continuing to raise interest rates until inflation dips back toward the central bank’s 2% target, Siegel said the Fed should allow commodity prices to fall to shoulder more of the burden of fighting inflation. Crude oil prices have fallen sharply from the highs they reached earlier this year, with WTI CLX22,
-4.86%
It fell $4.75, or 5.7%, to settle at $78.74 a barrel on the New York Mercantile Exchange on Friday, its lowest settlement since Jan. 10.

“I think the Fed is too tight,” Siegel added. “They are making the exact same mistake on the other side that they made a year ago.”

The Wharton professor also criticized the Federal Reserve for trying to drive the unemployment rate higher. He said it’s not workers who are driving inflation with higher wages – they’re just trying to catch up.

Siegel’s outcry caught the attention of the CNBC audience, and many took to Twitter to agree with his assessment that the Fed had made the mistake of keeping policy too loose for too long.

One Twitter Inc. TWTR,
+ 0.43%
The user said that the past three years of Fed policy likely won’t be respected by historians.

Another praised Siegel for causing “the outrage”.

A third joked that maybe Siegel and Powell should head to head.

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

Stocks closed sharply lower on Friday with all three benchmarks posting losses this week, with the S&P 500 SPX,
-1.72%
It fell 1.7% to close Friday’s session at 3,693.23, just above its lowest close of the year, which it reached in June. The Dow DJIA,
-1.62%
He wasn’t so lucky, as the blue chip index hit a closing low of the year at 29590.41. Nasdaq Composite,
+ 2.62%
It fell 198.88 points, or 1.8 percent, to 10,867.93 points.

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

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