Financial experts warn the Federal Reserve to consider cutting interest rates earlier than market expectations!

Jeremy Siegel, a Wharton professor, says the Federal Reserve needs to consider cutting interest rates sooner than the market expects, telling Everyday that inflation is largely under control and the threat of an imminent recession is real.

Jeremy Siegel, a Wharton professor, said on Monday that the Federal Reserve needed to remain flexible and consider cutting interest rates sooner than the market expected, given the looming threat of recession following weak economic data and inflation largely contained.

He told CNBC: "I think Jay Powell has to be on high alert because we did get some weak data, especially on the ISM, unemployment claims and last Friday [jobs report]. The Federal Reserve can't afford to make another mistake like it waited a year too late on inflation. Now, I'm not saying we're going to have a recession... but he has to be very alert to a slowdown."

The ISM manufacturing index for October came in at 46.7, well below the 49.0 forecast by economists. The latest data also marked the 12th straight month below the 50.0 level, indicating contraction in activity. Meanwhile, the October jobs report showed the economy added 150,000 jobs, below expectations of 180,000. The unemployment rate also rose to 3.9%.

Siegel believes that even if inflation persists, Powell must consider cutting interest rates next year because the economic environment today is very different from that of the 1970s, when inflation was a nightmare for the Federal Reserve.

"This is not the 1970s," says Mr. Siegel. "I just don't want him to be as slow on inflation as he has been on inflation. He has to be flexible... He has to really think both ways because we do have two-way risks now and the downside risks are clearly bigger than they were a week ago."

For Siegel, his warning presents a reliable recession foreshadowing, which happens when the unemployment rate rises 50 basis points from its cyclical low. In the last week, the unemployment rate rose to 3.9 percent from its April cyclical low of 3.4 percent. "This has foreshadowed many recessions to come. I don't think so yet, but I don't want the Federal Reserve to be as stubborn as they are on inflation," he said.

Finally, Siegel pointed out that if a recession looms before the 2024 election, the Federal Reserve could face intense political pressure from Democrats.

He ultimately predicted that the Fed's next interest rate move would be a rate cut rather than a rate hike, and that a rate cut could come sometime in 2024. "I think the Fed should end. Given the data, I think the next step is a rate cut, probably sooner than we think," Mr. Siegel said.

Markets currently expect the first rate cut to occur in May 2024, with as many as four 25 basis point cuts likely by the end of 2024, according to Fed Funds Futures.