Markets may be close to the bottom according to Jeremy Siegel.

The professor of finance at the University of Pennsylvania told CNBC on Wednesday that a 100 basis point rate hike by the Federal Reserve would be a cure for inflation.

Siegel said on the show that the Fed knows it was way too late to start talking about inflation.

To get cured, you need to take your medicine now. You need to take more medicine if you just let it go.

With annual inflation hitting a 40-year high of 8.6% annual inflation in May, the likelihood of sharper aggressive rate hikes has sent markets into a tail spin.

The U.S. stock market went into bear market territory this week.

The Fed can justify such an aggressive move by bringing forward the expected 50 basis point hike in July and combining it with the expected 50 basis point hike in June.

If the Fed doesn't make a big move this week, markets will think it doesn't have control over inflation.

There will be a big disappointment if Powell only does 50 points. He said that the markets are going to say that he doesn't have control.

If the inflation problem is solved by the Fed, a markets rally will likely occur as investors and firms factor in higher rates and begin to lower earnings forecasts.

Siegel said that the Fed should wait for the economy to recover from the 100 basis point hike. He said that too many aggressive moves could cause a serious recession.

He said that the financial markets have factored in a mild recession for 2023.

Siegel said that he thinks the rally will end within hours of the Fed's announcement.

The Fed needs to grab the narrative of inflation. You got to take your medicine now to get cured. If you just let it go, you’re going to have to take more medicine later on.

That would be a sign that we are taking the medicine. He said that if we take it sooner, we will be better off later on.

Siegel told CNBC that if the Fed moves strongly on Wednesday, inflation should cool by the end of the year and if commodity prices start to follow stock markets into bear territory.

The professor said that a major recession can be avoided if the Fed moves cautiously.

He said there is too much demand and too little unemployment.

Siegel said excess liquidity and rising demand were responsible for pushing up prices even though supply chain constraints were a part.

He said there was an "unprecedented burst of money".

During the first half of 2020 there was a record $2 trillion surge in cash hitting the deposit accounts of U.S. banks.

In April 2020, deposits grew by $865 billion, more than the previous record.

The explosion of demand was the result of that. Siegel understands that we have problems with Covid and the Russians.

The Fed should have acted after Covid hit. It can't get a hand out from the Fed.

We wouldn't have the inflation problem we have now if interest rates went up earlier.