Chief Economist Says Fed Won’t Hike Rates If Oil Holds Near $80
Jeremy Siegel, senior economist at WisdomTree and professor emeritus of finance at the Wharton School, said the Federal Reserve will likely skip a rate hike in September if oil holds near $80 a barrel.
Siegel spoke as the S&P 500 topped 7,800 for the first time, extending a rally that earnings and cooling inflation data have driven this month.
Cooling Inflation Data Backs the Case
Siegel said this week's inflation reports lowered the odds of a hike. The Consumer Price Index (CPI) report landed Wednesday, and the Producer Price Index (PPI) report followed on Thursday.
He said Goldman Sachs cut its forecast for the Personal Consumption Expenditures (PCE) price index, the Fed's preferred inflation gauge, after seeing the data. Siegel said the bank now expects the gauge to rise just 0.2% for the month.
Siegel tied part of that decline to the stock market's own gains. He said rising equity values flow into a portfolio management subcomponent inside the PCE index, pushing it lower.
That reading builds on a trend traders spotted after Wednesday's cooling CPI report. Traders had gone into that report split roughly evenly on a September hike, and the softer print tilted sentiment toward a hold.
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