+

Cookies on the Business Insider India website

Business Insider India has updated its Privacy and Cookie policy. We use cookies to ensure that we give you the better experience on our website. If you continue without changing your settings, we\'ll assume that you are happy to receive all cookies on the Business Insider India website. However, you can change your cookie setting at any time by clicking on our Cookie Policy at any time. You can also see our Privacy Policy.

Close
HomeQuizzoneWhatsappShare Flash Reads
 

Wharton professor Jeremy Siegel says the US won't spiral into a new bout of inflation even as economy stays hot

Aug 19, 2023, 00:15 IST
Business Insider
Wharton finance professor Jeremy Siegel.Steve Marcus/Reuters
  • The US won't see a resurgence in inflation, according to Jeremy Siegel.
  • In an interview with CNBC, the Wharton finance professor pointed to increased productivity.
Advertisement

Wharton finance professor Jeremy Siegel said he wasn't worried about inflation rebounding, despite the signs that the US economy has stayed resilient amid aggressive Fed tightening over the past year.

GDP is expected to grow 5.8% over the third quarter, according to an estimate from the Atlanta Fed. Meanwhile, job growth and wage growth remain strong, with the US adding 187,000 payrolls and hourly earnings up 4.4% year over year in July.

But the recent statistics are a vast improvement from last year, when the economy was hiring nearly 5 million new workers and GDP grew less than 1%. That was a reflection of poor productivity in the economy, Siegel said – a trend that has since turned around:

"It was the worst productivity performance in over 70 years. This year we are hiring at less than half the pace and we have two to three times the level of GDP growth. Why is that? One of the biggest bounce-backs in productivity I have ever seen," he told CNBC on Friday. "And that's saving Jay Powell. That's why we can have this tremendous GDP growth and still have the disinflationary trend."

While the latest Consumer Price Index showed inflation ticked up to 3.2% in July, the rate has fallen sharply from the 9.1% peak in June 2022.

Advertisement

And inflation won't reaccelerate as improving productivity justifies higher wages and drives more economic output, Siegel explained.

"I see the productivity as being a basic deflationary force that will keep that inflation in check," he added.

But others, like BlackRock, are more dubious about the path of inflation. And the Fed minutes from July's meeting revealed policymakers remain concerned about inflation and are open to more tightening.

Stocks slid this week while investors raised their bets that the Fed will hike rates one more time before the end of the year, according to the CME FedWatch tool.

You are subscribed to notifications!
Looks like you've blocked notifications!
Next Article