Federal Reserve Chairman Jerome Powell said Wednesday that he supported a 0.25-percentage-point increase in interest rates by the Fed at its meeting this month.
The renowned Wharton finance professor Jeremy Siegel disagrees. He told CNBC that the central bank at its meeting should lift rates by half a percentage point.
Siegel is concerned about inflation, with consumer prices soaring 7.5% in the 12 months through January, the biggest increase in almost 40 years. “This is not the time to slow down” on rate hikes, he said.
Siegel said it would be a “big policy mistake” for the Fed to curb its rate increases in response to the Russia-Ukraine war.
To be sure, the Fed had never committed to a half-point move for March. Interest-rate markets priced in such a rise after the consumer price report, but they returned to a forecast of 0.25 percentage point shortly afterward.
And Powell didn’t cite the war in Ukraine as a factor in his Wednesday call for a quarter-point hike. “The implications for the U.S. economy are highly uncertain, and we will be monitoring the situation closely,” Powell said.
To the extent that the war does play a factor in Fed policy, it could actually lead to more hawkishness. That’s because it’s pushing commodity prices higher. Powell said in congressional testimony Thursday that the war was likely to boost inflation.
“I think it’s fair to say that this war has changed the risk profile a little bit with respect to inflation,” he said, according to The Wall Street Journal.
