The Federal Reserve should listen to the market's concerns about the economy, Wharton School finance professor Jeremy Siegel told CNBC on Thursday.

The central bank raised rates by a quarter point on Wednesday and lowered its projections from three to two increases for 2019. It also said it would continue to shrink its balance sheet at the current pace.

Siegel said he was "pretty shocked" by the Fed's statement.

"This isn't good. They barely acknowledged any slowdown," Siegel said on "Power Lunch."

The Fed looks at U.S. data, which Siegel called "quite good" and he added it doesn't take into account the global economic situation unless it directly influences the U.S. However, Wall Street does both.

In fact, 45 percent of S&P 500 profits come from foreign sales, he pointed out.

"The stock market is going to be much more worried about the foreign slowdown, which we see everywhere, than does [Fed Chair] Jay Powell," he added.

And while the Fed lowered its 2019 projections to two increases, the futures market lowered its to "barely one," Siegel noted.

"They are behind the curve, they're behind what the fears of the market are," he said.

Stocks plunged Wednesday after the market realized the Fed sounded like it wasn't ready to pull back much from its tighter policy path. The sell-off continued Thursday.

Investors focused on the decision to keep the balance sheet reduction plan in place, which was seen as another tightening path.

Siegel thinks the Fed is still capable of catching up, pointing to its decision to skip a rate cut in December 2000 and then aggressively lower rates in January 2001 once it understood how poor the economy was.

"It isn't hopeless but it was really disappointing in terms of their acknowledgement of what the market was saying. I'm not surprised at the response."