FX: Most bulls Siegel: The US economy is in a Goldilocks state, and the Federal Reserve does not need to raise interest rates

　　Jeremy Siegel, a longtime equity bull and former Wharton professor, believes the US economy is in a Goldilocks state, neither too cold nor too hot, his view on the economy after June's lower-than-expected inflation data.

　　"This is a Goldilocks economy - strong economic growth and [...]6, -0.02, -0.33%) Falling inflation. "He believes that the Federal Reserve's aggressive rate hikes since March 2022 appear to be working its inflation-suppressing magic.

　　Mr. Siegel's upbeat view comes after the Bureau of Labor Statistics released data on Wednesday showing annual inflation fell to 3 percent in June, well below the 40-year high of 9.1 percent at this time a year ago. While many economists have warned throughout 2023 that rising interest rates could eventually trigger a recession, Mr. Siegel does not see it that way. "The Fed is likely to stick with a landing here and defy all expectations," he said, referring to a "soft landing" in which inflation is brought under control without the need for a job-killing recession.

　　In his view, US Quarter 1 GDP growth was revised up to 2% at the end of last month, while the Atlanta Fed's GDPNow tracker expects GDP to grow 2.3% in the second quarter. This is far from a recession.

　　Siegel also recently pointed out that U.S. consumer spending is incredibly resilient due to consumers' embrace of what he calls a YOLO (i.e., "you only live once") mentality. In this week's WisdomTree commentary, the retired professor explained that these summer consumers are "immune to rising borrowing costs" amid persistently low unemployment. Given that consumer spending accounts for 70% of U.S. GDP, this resilience should help keep the economy growing, he argued

　　Despite the recent positive news on inflation and growth, Mr. Siegel said Fed officials may already be locked in another rate hike this month. After that, he expects it to be "data dependent" when they decide whether to raise rates again at their next meeting in September, meaning the upcoming CPI and second-quarter GDP numbers will be crucial.

　　But Mr. Siegel said he would not raise rates again if he were Fed chairperson, arguing that inflation had been beaten and the strategy was just an "attack" on wages, which are in "catch-up mode" after years of falling real wage growth during the epidemic.

　　"I don't think inflation trends will return. I see stability," he said. "Oil has taken hold, commodity indices have stabilised, the housing market has stabilised. I don't think inflation will rise much."

　　Mr. Siegel is not alone in his growing optimism about the outlook for the US economy. Many investment banks and chief executives have been forced to revise their recession forecasts as economic data continue to surprise higher this year.728.03, -11.77, -1.59%Larry Fink, chief executive, said on Friday that the US remained in an "incredible position" compared with the rest of the world, saying he believed growth would "accelerate" from there as inflation subsided and fiscal stimulus entered the economy.