.@Wharton's Jeremy Siegel shares his take on the Fed’s latest rate hike, calling it a “terrible mistake.”— Squawk on the Street (@SquawkStreet) December 16, 2022
“Their plan, their dot plot is way too tight. Inflation is basically over,” he tells @SaraEisen. “Staying high through 2023...would guarantee a very steep recession." pic.twitter.com/4wzzPIkir8
“Inflation is basically over, despite the way Chairman Powell characterizes it,” he told CNBC on Friday. Siegel points to falling rent and home prices as evidence that the majority of inflationary pressures in the economy are already gone. Throughout 2022, he has made the case that Fed officials are looking at backward data to assess the housing market, which gives them a false picture of the current level of inflation in the economy. The Fed is “making a terrible mistake” by continuing to raise interest rates even as inflation comes down from its recent four-decade high, according to Siegel.We got more evidence that demand in the economy was slowing late last week, when we got indications that the Holiday Shopping season got off to a weak start (by seasonally-adjusted standards).
Consumers pulled back on spending in November, failing to keep up with even a muted level of inflation for the month, the Commerce Department reported Thursday. Retail sales for the month declined 0.6%, even worse than the Dow Jones estimate for a 0.3% drop. The number is not adjusted for inflation as gauged by the Labor Department’s consumer price index, which increased 0.1% in November, which also was below expectations. Measures that exclude autos and both autos and gas sales both showed 0.2% declines.But jobless claims have stayed low and wage growth has continued at a decent clip as 2022 ends. So might that cause inflation to come back up in 2023? Professor Siegel says no.
When asked about the potential for rising wages to cause inflation to be sticky next year, Siegel pointed out that when accounting for inflation, Americans’ wages have actually fallen throughout the pandemic. “Real wages have gone down. It’s hard for me to see that they’re pushing inflation up when they don’t even match inflation,” he said.Siegel is correct in noting that real wages have fallen from what seemed to be a post-COVID normal around $11.25 (which we were at for the middle part of 2021). And despite gains in the last few months, we have not come close to recouping the inflation-adjusted losses in real wages at the end of 2021 and the first half of 2022.
I like that Wall St has to pay for money now. Crypto scams and pirate equity deals to monopolize markets are getting bashed - this is good.
(strokes chin). That is a positive side effect, but I don’t think that crushing pirate equity pump-and-dumps is what the Fed is going for.ReplyDelete
Still isn’t worth the job loss and unneeded blasting of the housing market, though.