Wharton professor Jeremy Siegel warms up to the Fed after giving it a D grade in its inflation fight – and doesn't see the US slumping into recession this year

• Wharton professor Jeremy Siegel is warming up the Fed after months of criticism.
• The top economist highlighted strength in the US economy despite the Fed's aggressive rate hikes.

Wharton professor Jeremy Siegel is warming up to the Federal Reserve given it's succeeded in cooling US inflation without tanking the economy so far.

The renowned economist walked back on harsh criticisms toward Fed chair Jerome Powell last year, when he gave the US central bank a D grade for acting too late in its inflation fight, triggered by the US central bank itself via its easy-money policy during the COVID-19 pandemic.

"He does get a better grade," Siegel said, referring to Powell, in a Fox Business interview on Sunday. "I will admit I thought his rapid rise in rates would slow down the economy much faster than we have seen," he added.

The Fed has hiked rates by 500 basis points over the past year in a bid to tame inflation from 40-year highs above 9%. It's been triumphant in its efforts, with inflation rising at 3% through June. All of this while skirting a recession most investors have been so worried about.

In fact, the US economy appears to be in better shape than economists expected. Growth in the second quarter beat analysts' expectations, jobs numbers are robust, and consumers keep spending despite dwindling savings.

"There is amazing resilience," Siegel said. "I see a lot of resilience and my call for recession probability has definitely gone down over the last two months," he continued. "I would say its 2-1 against the recession at least for the rest of 2023 and early 2024," Siegel said.

As "the fight of inflation is going extremely well," the "Stocks for the Long Run" author added that further rate hikes by the Fed are not necessary.

"The hikes that have been put in place so far have not really squeezed the economy," he continued.

No doubt there is a slowdown in the economy with recent employment numbers coming in below economists expectations, Siegel said. Should signs of a slowdown in consumer spending become apparent to the Fed, they will need to stop raising rates, or even start cutting them even though there is some inflation in the US economy.