Moody's Economist Predicts Three Rate Cuts in First Half of 2026

Summary

Moody’s economist Mark Zandi predicts the Fed will cut rates three times in the first half of 2026 due to labor market weakness, inflation uncertainty, and political pressure, exceeding market expectations of two cuts.AASTOCKS+ 3

Impact Analysis

So they’re basically admitting that the economic outlook is worse than the market anticipates. Zandi’s call for three rate cuts in the first half of 2026, driven by a weak labor market and political pressure, suggests a more aggressive Fed stance than the consensus. This could mean the Fed is preparing for a significant economic slowdown, possibly exacerbated by political reshuffling under Trump. The timing is suspicious, given the market only expects two cuts, with the first not until April. This could lead to a shift in market sentiment, with increased volatility as investors reassess growth prospects. Bottom line—watch for potential opportunities in sectors sensitive to interest rates, like real estate and consumer finance, which might benefit from lower borrowing costs. But be cautious of sectors vulnerable to economic downturns, as the underlying signals point to broader economic challenges ahead.AASTOCKS+ 4