Wharton School finance professor Jeremy Siegel said he expects the Federal Reserve to raise interest rates next week, as oil prices and long-term bond yields keep climbing.
Siegel told CNBC’s “Closing Bell” that holding rates steady would risk the credibility of Fed Chair Kevin Warsh, who took over the central bank in May 2026.
Fed’s Warsh Faces a Credibility Test
Siegel said financial markets routinely test new Fed chairs, and called next week’s meeting that test for Warsh. Even so, he said, President Donald Trump has pushed publicly for lower rates.
“I think he’s going to bite the bullet and raise rates because if he doesn’t raise rates, I think there might be four or five or maybe six dissents, which would be unprecedented,” Siegel said.
He pointed to Fed Governor Christopher Waller’s inflation threshold. A monthly core reading near 0.2% could support a hold, Siegel said. A 0.3% print, he added, would tilt the committee toward a hike.
Warsh’s hawkish Jackson Hole speech last month already pushed hike odds higher. The 10-year Treasury yield has since climbed toward 4.90%, its highest level since 2023. Brent crude, meanwhile, has pushed past $100 a barrel.
Fresh inflation data lands just before the Fed meets. Siegel said this week’s consumer price index report could still shift the committee’s thinking either way.
A Selloff, Then a Recovery
Siegel predicted markets would react sharply and sell off immediately after a hike announcement. He then expects long-term bonds to rally as investors view the Fed as credible on inflation, lifting stocks in turn.
Rising energy costs remain the bigger near-term risk to sentiment, Siegel said. Gasoline futures could climb another 20 to 30 cents, pressuring consumers this fall.
Siegel expects stocks to stay rangebound over the next few weeks. He pointed to the next earnings cycle, once the quarter closes, as the market’s following catalyst.
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