GOP Faces Midterm Headache as Treasury Yields Stay Elevated
Rising 10-year Treasury yields near 4.85% pressure GOP midterm strategy as Trump pledges $5,000 payments amid debt concerns.
Jeremy Siegel says the Fed must raise rates next week to maintain credibility, despite risk of a selloff.
Jeremy Siegel, a finance professor at Wharton School, stated he anticipates the Federal Reserve will hike interest rates next week, with oil prices and long-term bond yields continuing their ascent.
In an interview on CNBC's "Closing Bell," Siegel argued that keeping rates unchanged would endanger the credibility of Fed Chair Kevin Warsh, who assumed leadership of the central bank in May 2026.
According to Siegel, financial markets commonly test new Fed chairs, and he described next week's meeting as Warsh's test. He noted that President Donald Trump has publicly advocated 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.
Siegel referenced Fed Governor Christopher Waller's inflation threshold. A monthly core reading near 0.2% might justify a pause, according to Siegel. A 0.3% figure, he said, would push the committee toward a rate increase.
Warsh's hawkish speech at Jackson Hole last month had already raised the probability of a hike. Since then, the 10-year Treasury yield has risen toward 4.90%, the highest since 2023. Brent crude has also topped $100 per barrel.
New inflation figures are due just before the Fed's meeting. Siegel said this week's CPI report could still alter the committee's stance in either direction.
Siegel forecast that markets would respond aggressively, selling off right after a rate hike announcement. He then anticipates long-term bonds to gain as investors see the Fed as credible on inflation, subsequently boosting stocks.
Siegel stated that increasing energy costs pose a greater near-term threat to sentiment. Gasoline futures might rise another 20 to 30 cents, putting pressure on consumers this autumn.
Siegel predicts equities will remain rangebound for the next several weeks. He indicated that the upcoming earnings season, after the quarter ends, will be the next trigger for markets.
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Rising 10-year Treasury yields near 4.85% pressure GOP midterm strategy as Trump pledges $5,000 payments amid debt concerns.
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