Jeremy Siegel Expects Fed to Raise Interest Rates Next Week

Wharton professor Jeremy Siegel expects the Federal Reserve to increase interest rates during its upcoming meeting. He suggests that Fed Chair Kevin Warsh needs to secure his credibility by taking a firm stance against inflation. According to Siegel, opting to hold rates steady could lead to an unprecedented number of dissents within the committee.

Rising energy costs and climbing bond yields provide the backdrop for this decision. With Brent crude prices moving past 100 dollars per barrel and Treasury yields near 4.90 percent, the economic pressure is mounting. Siegel noted that the final decision could still shift depending on the latest consumer price index data released just before the meeting.

Investors should prepare for potential volatility. Siegel predicts an initial selloff if the hike happens, but he believes this could be followed by a recovery as the market gains confidence in the Fed's inflation strategy. Higher gasoline prices remain a looming threat to consumer sentiment, meaning the market may stay rangebound until the next earnings season begins.