David Orrell | CNBC
Wharton Business School professor Jeremy Siegel criticized the Federal Reserve and its chairman, Jerome Powell, on Monday, saying the U.S. central bank is moving too aggressively to fight inflation and will hurt American workers in the process.
Siegel said on CNBC’s “Squawk Box” that persistently high inflation in 2022 is due in large part to mistakes made by the Fed in the aftermath of the coronavirus pandemic, which caused economic shutdowns around the world and big drops in global markets, and that the Fed’s pivot to fast rate hikes would cause more economic damage.
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“Honestly, I think Chairman Powell should offer the American people an apology for such poor monetary policy that he has pursued, and the Fed has pursued, over the past few years,” Siegel said.
The comments come after another 0.75 percentage point hike from the Fed last week, which brought the central bank’s target range for its benchmark interest rate to 3%-3.25%. Projections from Fed policymakers at last week’s meeting showed that the rate could jump well above 4% in coming months.
Siegel said the Fed is “talking way too tough” and should be more worried about causing a recession than focusing on lagged inflation data. He also said the Fed is being inconsistent with how it uses some pieces of economic data.
“Chairman Powell talked quite a bit about JOLTS data — the job opening and labor turnover data. How tight it is. … Interesting thing, I look back a year ago September, it was exactly as tight as it is today. And he never said anything about inflation. What’s caused him to change his mind? It’s the same data,” Siegel said.
Inflation has been running at its fastest pace since the early 1980s for much of this year. Some of the price increases were due to factors like supply chain issues from Covid and Russia’s invasion of Ukraine, which drove up the price of commodities. But inflation appeared to be broadening out in recent reports, even as the price of oil has declined sharply.
One source of inflation that worries some economists and policymakers now is the threat from rising wages, which can create a so-called wage-price spiral, where higher prices push up wages, which then reinforce still higher prices.
However, Siegel said he doesn’t think wages are really driving inflation this time, saying that recent worker raises appear to be “catch-up” rather than impetus.
“It seems to me wrong for Powell to say we’re going to crush wage increases, we’re going to crush the worker, when that is not the cause of the inflation. The cause of the inflation was excessive monetary accommodation for the last two years,” Siegel said.