Jeremy Siegel, a finance professor at the Wharton School, anticipates that the Federal Reserve will increase interest rates during the upcoming meeting. He argues that maintaining current rates would undermine the credibility of Fed Chair Kevin Warsh, who assumed his position in May 2026.
Siegel notes that the committee faces pressure from President Donald Trump, who advocates for lower rates. However, the professor suggests that failing to hike rates could lead to an unprecedented number of dissents among committee members. The decision may hinge on core inflation data, with a 0.3% reading likely triggering a hike.
Current economic indicators show the 10-year Treasury yield rising toward 4.90%, the highest level since 2023. Additionally, Brent crude prices have exceeded $100 per barrel. Siegel expects an immediate market selloff following a rate hike, followed by a recovery as investors regain confidence in the Fed's inflation policy.
The professor warns that rising energy costs present a significant risk, noting that gasoline futures could increase by another 20 to 30 cents. He predicts that stock prices will remain rangebound in the near term, with the next earnings cycle serving as the primary catalyst for market movement.
