Jeremy Siegel, professor emeritus of finance at the University of Pennsylvania’s Wharton School of Business, on Tuesday said that the Federal Reserve has "little reason" to raise interest rates further ahead of the Consumer Price Index (CPI) report today, arguing that stable oil prices and increasingly concentrated inflation pressures support an extended pause in monetary policy.

In his latest weekly market commentary, Siegel said the Fed's outlook hinges on energy prices remaining contained despite renewed geopolitical tensions in the Middle East.

“That distinction argues for patience rather than additional tightening. If oil remains near current levels and energy prices avoid another sustained advance, the Federal Reserve has little reason to raise interest rates further,” he said.

Wall Street expects CPI for June to come in at 3.8% on an annualized basis, according to a consensus estimate compiled by MarketWatch.

Why Oil Matters More Than Geopolitics

Despite renewed hostilities in the Middle East, Siegel said crude oil has remained remarkably resilient, calling it one of the market's most important signals.

He attributed the muted reaction to expanding global production capacity, alternative export routes, adequate inventories and softer demand, all of which have reduced oil's sensitivity to geopolitical disruptions.

Siegel added that while elevated refinery margins have temporarily kept gasoline prices firm, a normalization in refining spreads could allow pump prices to resume their downward trend in the coming months.

AI Chip Costs Could Keep PCE Inflation Sticky

Siegel said investors should pay close attention to the composition of inflation rather than just the headline CPI figure. While lower gasoline prices could help ease consumer inflation, he argued that a surge in memory chip prices driven by massive AI infrastructure spending is emerging as an overlooked source of price pressure.

“Recent research suggests this alone could add roughly half a percentage point to core PCE inflation by year-end, even while contributing only modestly to CPI,” he said.

Because the PCE index is the Fed’s preferred inflation gauge, he said policymakers should recognize that any lingering inflation may reflect technology input costs tied to the AI boom rather than broad-based demand, strengthening the case for patience on interest rates.

AI Profit Boom Keeps Bull Case Alive

Beyond the inflation outlook, Siegel said the broader backdrop for equities remains constructive, pointing to steady economic growth, accommodative financial conditions and robust corporate earnings.

He noted that consensus forecasts call for nearly 24% year-over-year earnings growth, driven less by rapid economic expansion than by widening profit margins fueled by AI investments and productivity gains.

Early earnings reports, including Delta Air Lines' decision to maintain its full-year outlook despite higher jet fuel costs, reinforce that resilience, Siegel said.

While geopolitical headlines could continue to drive short-term volatility, he believes stable energy prices, expanding liquidity and strong corporate profitability continue to support the case for higher equity prices.

At the time of writing, the  (SPY), which tracks the S&P 500 index, was up 0.11%; the  (QQQ) rose 0.15%; and the  (DIA) gained 0.12%. Retail sentiment on Stocktwits regarding the S&P 500 ETF was in the ‘bearish’ territory.