Jeremy Siegel says the Fed’s inflation-fighting plan still isn’t tough enough, likes stocks long term

Published Thu, Mar 17 20221:55 PM EDTUpdated Thu, Mar 17 20222:30 PM EDT

Kevin Stankiewicz @in/kevin-stankiewicz-b5593466 @kevin_stank

Jeremy Siegel has warned for a year that the Federal Reserve was underestimating the inflation situation, and the Wharton School finance professor said Thursday he feels the U.S. central bank's plan to tame it remains inadequate. "In my opinion, they're still not aggressive enough given the worsening inflation," Siegel said on CNBC's "Halftime Report" one day after the Fed raised interest rates by a quarter percentage point. Fed officials signaled they expect to hike six more times this year. The central bank also may begin reducing the asset holdings on its balance sheet as soon as May . "What I see this year is a struggle. I think profits are going to be good, but I think the Fed is going to have some half-point hikes, maybe quite a few along the way, so we're just not going to end up at 1.9%," Siegel said. The professor was referring to the 1.9% consensus funds rate the Fed's policymaking arm expects to have by year-end, based on the expected number of rate increases. In December, Federal Open Market Committee members thought it would be 0.9%, an indication the central bank has become more hawkish. "I know this is a hawkish uptick, certainly, from three months ago, but I don't see how it can solve a 7% to 8% inflation that is getting worse. What we need to do is get above that. Yes, there's going to be some market turbulence on that, but those earnings are still going to be coming in, I think," Siegel said. The belief that corporate profits will remain strong throughout the spring and summer months should lend support to certain stocks, Siegel said. In general, he said he thinks equities look attractive compared with other assets, such as bonds. "Stocks are real assets. I still really like them for the long run. I just think we're going to have a zig-zag as the Fed has to say, 'I might have to get more aggressive.' But then everybody else says, 'Where else am I going to go?'" Siegel said. "We'll have a choppy market, but I'm certainly positive on stocks for the long run," he added.

Jeremy Siegel

David Orrell | CNBC