Jeremy Siegel Says Fed Should Not Hike Policy Rate In June: 'There Are Storm Clouds Over US Economy'

Wharton professor Jeremy Siegel reportedly said the Federal Reserve should not hike its policy rate during its June meet and that the delayed effect of its tight monetary policy is going to be felt in the second half of this year.

Siegel also indicated the upcoming employment data release will be crucial in deciding the Fed's future path. "That will be a critical report. I do not think they should raise. I think there are storm clouds over the U.S. economy," he told CNBC.

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U.S. markets registered gains on Friday in anticipation of lawmakers reaching a consensus on the debt ceiling crisis over the weekend. As anticipated, President Joe Biden on Sunday reached a budget agreement with House Speaker Kevin McCarthy to suspend the $31.4 trillion debt ceiling until Jan. 1, 2025. Biden also said the deal was ready to move to Congress for a vote.

Fed Policy: Siegel pointed out that although the debt ceiling has provided some relief, concerns do exist about the central bank's aggressive monetary policy so far. "So, it does clear a little bit of uncertainty but there is a lot of worries ahead about the tremendous tightening that the Federal Reserve has done," he said.

"The bank problems — that will not lead to a crisis of bank deposits but tightening lending standards, particularly for small and mid-sized companies. And I am concerned about the second half of the year and possibly, what we might see is now a focus on those problems," he added.

The Wharton professor also pointed out that big cap stocks of any sort, whether they are tech or not, don't have to worry about the credit conditions. "Yes, they have to worry about interest rates to be sure. Credit conditions are going to affect small and the mid-sized; the S&P 500 could actually become a winner from the banking crisis…" he said.

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