Wharton’s Jeremy Siegel is urging the Federal Reserve to take immediate action following the disappointing jobs report released on Friday. Siegel is calling for an emergency 75 basis-point cut in the federal funds rate, with an additional 75 basis-point cut at the September meeting.
Siegel, a professor emeritus of finance at the University of Pennsylvania’s Wharton School, believes that the current fed funds rate should be between 3.5% and 4%. He points out that the latest jobs report showed slower growth than expected, with the unemployment rate rising to 4.3%, surpassing the central bank’s target rate of 4.2%. Additionally, inflation has decreased significantly towards the Fed’s target of 2%.
In response to Siegel’s comments, Chicago Federal Reserve President Austan Goolsbee did not confirm whether the central bank would implement an emergency rate cut. However, he stated that if the economy worsens, the Fed will take action to address it.
Siegel is confident that the market will respond positively to the proposed rate cuts, citing a similar situation in 2001 when an emergency 50 basis-point cut resulted in a rally. He emphasizes the importance of the Fed responding promptly to economic indicators, as delays could have negative consequences for the economy.
If the Fed delays the rate cuts until September, Siegel warns that the market may react poorly. He believes that swift action is necessary to prevent further economic challenges. Ultimately, Siegel stresses the importance of the Fed’s responsiveness to market conditions and the potential benefits of immediate rate cuts.