But Wharton professor Jeremy Siegel says the CPI figure doesn’t represent reality.

“Inflation is basically over, despite the way Chairman Powell characterizes it,” he told CNBC on Friday. 

Siegel points to falling rent and home prices as evidence that the majority of inflationary pressures in the economy are already gone. Throughout 2022, he has made the case that Fed officials are looking at backward data to assess the housing market, which gives them a false picture of the current level of inflation in the economy.

The Fed is “making a terrible mistake” by continuing to raise interest rates even as inflation comes down from its recent four-decade high, according to Siegel.

“I see no reason to go any higher than we are now,” he said on Friday, arguing that this year’s interest rate hikes have yet to be felt in the economy, and as they are, consumer prices will drop sharply. 

“The talk of going higher and staying higher, I think, would guarantee a very steep recession,” he added.

When asked about the potential for rising wages to cause inflation to be sticky next year, Siegel pointed out that when accounting for inflation, Americans’ wages have actually fallen throughout the pandemic.

“Real wages have gone down. It’s hard for me to see that they’re pushing inflation up when they don’t even match inflation,” he said.

Real wages—or wages adjusted for inflation—dropped 1.9% from a year ago last month, the Bureau of Labor Statistics reported Tuesday. That’s a far cry from the 2% average annual real wage growth seen since World War II, Siegel said.

Siegel also noted that there has been a “structural shift” in the labor force in recent years that involves a smaller overall percentage of Americans working, and argued that the Fed’s interest rate hikes won’t help solve it.

“If people don’t want to work, then firms have to offer higher wages in order to induce them to work,” he said. “It is not the Fed’s job to suppress the economy because there is a structural supply shift. They take care of aggregate demand, not shifts in supply.”

It may make sense to listen to Siegel’s latest forecast, because he’s made some prescient predictions over the past few years.

In June of 2020, the Wharton professor told Barry Ritholtz, chief investment officer of Ritholtz Wealth Management, that inflation was set to rise and argued the Fed wasn’t anticipating it.

“I think for the first time, and I know this is a sharp minority view here, for the first time in over two decades, we’re going to see inflation,” he said, claiming that Fed officials had overstimulated the economy with years of near-zero interest rates.

Siegel turned out to be right. Inflation soared from just 0.6% when he made his forecast to over 5% in under a year.

But now, he says that Fed officials have done enough to slow rising consumer prices, and his new fear is that they may ultimately drive the U.S. economy into a recession with interest rate hikes.

However, if the Fed decides to pause or cut rates sometime next year, Siegel believes the S&P 500 will rally 15% to 20%.