Jeremy Siegel: Stocks will likely stall without Fed rate cut

Many analysts don't think the economy will get weak enough to force the Federal Reserve to cut interest rates this year.

That view was reinforced when the government reported Wednesday that year-over-year consumer prices dipped only to 4.9% in April from 5% in March. That's way above the Fed's target of 2%. And job gains have been solid in recent months.

DON'T MISS: Looks Like The Fed Is on Hold at Least Through June

But market guru Jeremy Siegel anticipates several months of job losses later this year. And he expects the banking crisis to put a crimp on lending. If the Fed doesn't answer with rate reductions, the stock market's rally may be done for the year, the Wharton School finance professor told CNBC.

The progress on inflation -- the year-over-year consumer-price increase was the smallest in two years – is enough to make the Fed pause at its June meeting, many economists say. That would follow 10 straight meetings with rate hikes.

Siegel Worries Fed Will Stay Tight

Siegel is concerned that the Fed will be reluctant to cut rates once it adopts that steady stance after June. "The worry I have is the Fed is going to say … 'we're going to stay tight,'" he said.

"If we see payrolls go negative, if we see GDP negative, and the Fed doesn't cut, then it's going to be tougher sledding for the markets." GDP growth slowed to 1.1% annualized in the first quarter.

As for the stock market, if the Fed "responds to the downside [of the economy/inflation] as rigorously as it responded to the upside," the S&P 500 could generate a 15% total return this year, Siegel said. But if Fed officials don't move fast in easing, Siegel anticipates a return of 5% to 10%.

The S&P 500 generated a total return of 7.9% year to date through May 9.