Moody's chief economist: Fed rate cuts are expected next year, but patience is needed.

On December 26, Moody's chief economist Mark Zandi stated that the Federal Reserve is likely to cut interest rates multiple times in 2026, not because of economic prosperity, but because he feels the economy has reached a delicate balance.

In Zandi's view, this unusual combination points to a gradual, cautious interest rate path rather than an aggressive rate-cutting cycle.

Inflation also complicates the Fed's rate-cutting prospects. Zandi believes that CPI is closer to 3% than the Fed's target, affecting the speed at which policymakers act. Official data supports his argument: in November 2025, the US CPI rose 2.7% year-on-year (core CPI was 2.6%), still above the Fed's 2% target. He noted, "Inflation is still well above the level the Fed would like, and while upside surprises are still possible, the risks are two-way." (Jinshi)