Hotter inflation ahead could pressure the Federal Reserve to pullback its easy monetary policy earlier than planned and shake up the stock market, Wharton School's Jeremy Siegel said Friday. "For next year we're going to have much more inflation," the prominent finance professor told CNBC's "Squawk Box." "When you see worse inflation, the Fed is going to be pressured and that's going to disturb the market and that's down the line." The Fed said Wednesday that tapering of its asset purchasing program — the stimulus put in place to boost the economy during the Covid-19 pandemic — may "soon be warranted." Fed Chair Jerome Powell said in a press conference that the tapering process could be wrapped up by the middle of next year. Nearly half of the central bank's members see at least one rate hike in 2022. But the Fed may need to act more aggressively to control inflation, according to Siegel. "Powell opened the door saying, if things get worse, we will have to taper faster. If that happens toward the end of the year, that would rattle the market," Siegel said. The Wharton professor also noted his concern that the central bank could reach too far when addressing rising prices. "I worry actually about an overreaction. Because a lot of that inflation that we're going to have, I think it's already there in the pipeline," Siegel said. "The Fed can't really do anything about it. If they panic and say 'oh my god, we're way behind the curve, let's jack up rates'. That's bad. That will really trouble the market and the economy." While Siegel sees the inflation-related market woes coming in early 2022, he think markets should have room to run in the near-term. "I think the the road looks clear ahead for a month or two," Siegel said. "We could have a market up 10% before another 10% drop."
Scott Mlyn | CNBC
Hotter inflation ahead could pressure the Federal Reserve to pullback its easy monetary policy earlier than planned and shake up the stock market, Wharton School's Jeremy Siegel said Friday.