US consumer inflation in % y/y. Source: Trading Economics
Last year, the Fed made a serious mistake by dragging out its rate hikes and losing control of inflation, it said in a statement. interview CNBC Jeremy Siegel (Professor of Finance at the Wharton School of the University of Pennsylvania and author of the so-called Siegel Paradox).
The economist recalled how, looking at the rapid rise in prices of all commodities, Fed Chairman Jerome Powell “didn’t see any inflation” and also “didn’t see any need to raise rates in 2022.”
“Now that those same commodities are down, he says stubbornly high inflation requires the Fed to keep monetary policy tight throughout 2023,” Siegel said. “That doesn’t make any sense at all.”
The economist believes that the Fed’s policy will provoke a serious recessionand that instead of raising rates, the regulator should have allowed declining commodity prices to continue to suppress inflation.
“I think the Fed is being too tight on monetary policy. They make the same mistake as a year ago, only with a different sign,” Siegel sums up.
Recall that the growth rate of consumer inflation in the United States remain above 8% y/y for six consecutive months.
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