Moody's Chief Economist Forecasts Aggressive Fed Rate Cuts to Begin in Early 2026

Moody’s Analytics Chief Economist Mark Zandi has outlined a more aggressive monetary policy outlook compared to mainstream expectations. He anticipates the Federal Reserve will execute three consecutive rate cuts in the first half of 2026, with each reduction removing 25 basis points from the current rate structure.

According to Zandi’s analysis, several interconnected factors will drive this expansive policy shift. The deteriorating employment conditions stand as the primary catalyst—companies currently lack sufficient confidence to expand their workforce amid uncertainties surrounding pending trade and immigration policy changes. This hesitation will suppress job creation in the near term, allowing the unemployment rate to climb further.

“The Fed rate will remain on a downward trajectory as long as unemployment continues to rise,” Zandi explained. He projects that insufficient job growth will persist through early 2026, creating an environment where policymakers feel compelled to provide monetary relief. Additionally, lingering inflation uncertainties and political considerations will reinforce arguments for rapid rate reductions.

Notably, Zandi’s forecast stands significantly more hawkish on cuts than the consensus view. Both financial markets and Federal Reserve officials are currently positioned for a more measured easing cycle with fewer rate adjustments. This divergence highlights ongoing debate about the economic trajectory and the appropriate pace of fed rate policy adjustment heading into 2026.