Wharton professor Jeremy Siegel said on Friday that he is not ruling out an interest rate cut by the Federal Reserve by the end of the year, despite market expectations.
Fed fund futures traders are pricing in a scant 1% chance that the central bank will lower its key interest rate from the current range of 5% to 5.25%, according to CME FedWatch.
The U.S. central bankers penciled in two more rate hikes this year in its “dot plot” forecast at their last meeting in June.
“Coming into a political year, and it seems that we are already in a political year, if we get some soft data, if we get some worrisome employment data, if we get a negative jobs report, you are gonna have political pressure,” Siegel said in an interview with CNBC on Friday.
Siegel also said he thinks the true inflation numbers have already fallen down to the 2% target year-over-year, if calculated with the real rental and shelter prices. While the core PCE index, which is Fed’s favorite inflation gauge, still stood at around 4.6% in May, the Fed “also knows that lower data is going to come in the second half of the year,” according to Siegel.
While Siegel said there are still more risks on the downside than on the upside in the second half of the year, the stock market’s upward momentum could continue. “I don’t see the short-run trend breaking at any point soon,” Siegel said.
U.S. stocks rallied to close the first half of this year, with the Dow Jones Industrial Average
DJIA,
up 3.8%. The S&P 500
SPX,
jumped 15.9% and the Nasdaq Composite
COMP,
gained 31.7%, according to FactSet data.
Read the full article here
