The Federal Reserve must understand inflation has been dealt with and stop raising interest rates, according to Jeremy Seigel, a closely followed finance professor at the University of Pennsylvania’s Wharton School. Seigel said on CNBC’s “Halftime Report” that the market has rallied so far this year because investors see signs that inflation is coming back down. He said Thursday’s consumer price index report for December was a data point that could be taken, with some tweaks, to show inflation is a problem for the country that has been “solved.” Thursday’s reading showed CPI, which measures the prices of a broad basket of goods and services, fell 0.1% for the month but was still up 6.5% from the same month a year prior. “Core” CPI, which measures the same basket with the exception of food and energy, rose 0.1% from November to December and was up 5.7% from a year ago. Both readings came in line with Dow Jones expectations. “The Fed is, at some time, going to be forced to realize that we’ve really solved the inflation problem,” Seigel said on “Halftime Report.” “That’s one reason the market has rallied.” Seigel pointed specifically to rent, which remained up 8.3% in the December reading , as a part of the CPI that should not be taken at face value. He called it a lagging data point, pointing to other data such as rental indexes that shows housing costs have actually come down . With that declining figure calculated in place for rent prices, Seigel found “core” CPI actually should have fallen for the month as well. Core inflation is what influences the Fed’s decisions the most. Because of that, he said it’s clear the Fed does not need to implement further interest rate hikes. He said December’s 0.5% hike should be the final increase, but he’s “not gonna quibble about 25 basis points,” in reference to expectations from some market observers the central bank could implement a quarter point hike at the next meeting. (A basis point is equivalent to 0.01%.) He also said he does not believe Minneapolis Fed President Neel Kashkari’s comments that bond investors trying to move optimistically would lose a game of chicken with the central bank. “The market knows better than the Fed what is actually going to happen,” Siegel said. Siegel also took aim at Fed Chair Jerome Powell during his CNBC interview, saying that labor data indicating a hot job market is not enough justification alone to continue raising interest rates. “Inflation on a forward-looking basis is very low,” he said. “Powell’s over-concern about wages, which have not caught up to inflation over the last two-and-a-half years since Covid, … is unfair to the workers, and not something the Fed should be looking at right now.”
