US Midterm Elections and Trump Pressure Are Stopping Rate Hikes, Says Wharton Professor
Wharton finance professor Jeremy Siegel says the Federal Reserve would already be elevating charges. He blames strain from the 2026 midterm elections and President Donald Trump.
Siegel spoke after a stronger-than-expected August jobs report. Trump additionally posted on Truth Social, threatening to halt commerce with surplus international locations until the Fed cuts charges.
August Jobs Data Shifts the Rate Debate
The US financial system added 162,000 jobs in August, greater than triple the latest month-to-month common. Unemployment held regular at 4.1%, and wage development stayed at 3.1% 12 months over 12 months.
Siegel called it a supply-driven labor market, not an overheating one. Labor-force participation rose to 61.6%, and mixed revisions added 55,000 jobs to June and July.
That pushed merchants to boost bets on a price hike over a reduce. The shift applies to this month’s Federal Open Market Committee (FOMC) assembly.
It marks a reversal from expectations after a weak July payrolls report.
Trump’s Threat Meets a Hawkish Fed
Trump’s Friday publish repeated a requirement he has made for months.
“We ought to have the LOWEST INTEREST RATES of any nation within the World … CUT INTEREST RATES OR I WILL STOP TRADING WITH COUNTRIES WHERE WE HAVE A DEFICIT.”
Trump wrote the publish on Friday, as Reuters first reported. He has repeatedly pressured the Fed to chop charges this 12 months.
Siegel stated the midterms give Trump added incentive to maintain borrowing prices low. That makes a September hike politically fraught for the White House.
Fed Chair Kevin Warsh has given no such sign. Siegel pointed to M2 cash provide development of about 10% for the reason that Iran battle started.
That battle, a short conflict between the US and Iran, led to June. He referred to as the expansion tempo extreme.
He famous Warsh had flagged cash provide as a key metric throughout his Jackson Hole address final month.
Siegel expects a hike would set off solely a short damaging market response. Traders would probably welcome the Fed defending its inflation-fighting credibility, as long as tariffs keep contained.
This week’s producer and shopper value index reviews, due Thursday and Friday, ought to assist settle the talk.
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