In an interview with CNBC, a leading economist is calling for the U.S. Federal Reserve to cut interest rates much faster than anticipated.
In an interview with CNBC, a leading economist is calling for the U.S. Federal Reserve to cut interest rates much faster than anticipated. Jeremy Siegel, professor emeritus of finance at the Wharton School of Business stated, “I'm calling for a 75 basis point emergency cut in the Fed funds rate, with another 75 basis point cut indicated for next month at the September meeting, and that's minimum." A basis point represents one-hundredth of one percent, so a 75 basis point cut would reduce the rate by 0.75%.
Siegel contends that the Fed funds rate should already be between 3.5% and 4%, significantly lower than its current target range of 5.25% to 5.5%. Siegel's recommendation comes in the wake of disappointing job numbers that have heightened fears of a U.S. recession. The economic instability has been exacerbated by the Bank of Japan's decision to raise its interest rate above 0%, which has wreaked havoc on both stock and cryptocurrency markets.
On Monday, Bitcoin (BTC) fell below $50,000 for the first time since February, reminiscent of the market crash in March 2020 at the onset of the coronavirus pandemic.
Siegel, who also serves as a senior economist at WisdomTree Investments, argues that another cycle of Federal Reserve rate cuts is overdue. "The Fed has said that the long-run fed funds rate—when inflation reached 2% and unemployment has come up to 4.2%—should be 2.8%," explained Siegel.
Siegel warns that inaction could have dire consequences: "If they're going to be as slow on the way down as they were on the way up—which, by the way, was the worst policy error in 50 years—then we're not in for a good time with this economy."
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