The Federal Reserve should not raise interest rates by 50 basis points at its next policy meeting, said Jeremy Siegel, pressor emeritus of finance at the University of Pennsylvania Wharton School. "I definitely think that that is the wrong decision," he said on CNBC's "Squawk Box" Thursday. Siegel also called the Fed's focus on worker pay "misguided," nothing that wages have increased less than inflation since the Covid pandemic began. In the fourth quarter of 2022, the rate of increase in the employment cost index , a measure of wage growth, slowed from the prior quarter and the overall index came in slightly under the expectations of economists polled by Dow Jones. The central bank has pointed to the hot job market as a major reason for implementing further interest rate hikes. January's job data flew in the face of economists' expectations, with nonfarm payrolls increasing by 517,000 compared with the 187,000 expected ahead of the reading. Investors are looking ahead to Friday, which brings the February jobs report. Many are hoping it shows signs of a cooling labor market as the central bank weighs how, or if, it should move interest rates at the next Federal Open Market Committee meeting in less than two weeks. After chairman Jerome Powell's remarks to Congress Tuesday, the consensus of Wall Street opinion is now that the Fed will raise rates half a percentage point rather than the quarter point that had previously been expected. Siegel said wages that have lagged inflation is evidence the job market isn't necessarily as strong as it appears, but still noted that, to the degree wages have increased at all, that should encourage sidelined workers to return to the job market, boosting the labor force participation rate. "Workers are way behind where they normally are over the last three years," he said. Siegel said the central bank should move away from its focus on only specific parts of the consumer price index — what he called the "mini core." January's CPI was 0.5% higher than the month prior and up 6.4% on an annual basis, both of which were higher than the consensus estimates of economists polled by Dow Jones. "Super core" services inflation, which excludes food, shelter and energy prices and is considered a key indicator for the Fed, also rose more than expected. Rather than focusing on the "terribly backward-looking" index, he said the Fed can look to falling commodity and freight prices as examples of disinflation. Siegel told CNBC in January that the U.S. has "really solved the inflation problem" and that it would be a mistake for the Fed to continue raising interest rates.
