Mark Zandi Projects More Aggressive Fed Rate Cuts Than Market Expectations for Early 2026

According to Odaily Planet Daily News, Moody’s Analytics Chief Economist Mark Zandi has outlined a notably more hawkish monetary easing scenario than currently priced into markets. The analyst forecasts that the Federal Reserve will execute three consecutive rate cuts of 25 basis points each during the first half of 2026—a pace significantly outpacing consensus expectations.

Zandi’s rationale centers on three interconnected factors: a persistently soft labor market, ongoing inflation volatility, and mounting political considerations. Unlike the Federal Reserve’s own guidance and market pricing, which suggest a measured approach to policy normalization, Zandi contends that employment weakness will compel the central bank toward more decisive action.

The employment narrative forms the crux of his argument. Zandi notes that corporate uncertainty surrounding forthcoming shifts in trade policy and immigration rules will likely delay hiring decisions. “Businesses require greater clarity before committing to hiring expansion,” he explains. “This hesitation will prevent the labor market from achieving sufficient strength to stabilize unemployment, let alone reduce it.”

The mechanism is straightforward: as long as the unemployment rate continues its upward trajectory, the Federal Reserve will maintain downward pressure on rates. Zandi expects this dynamic to persist particularly through early 2026, when labor market slack will remain a critical policy concern.

This projection starkly contrasts with prevailing sentiment. Both Federal Reserve communications and financial markets currently embed expectations for a slower, more gradual unwinding of restrictive monetary conditions. Zandi’s three-cut forecast for the first six months alone represents a more aggressive policy path than most analysts and policymakers are currently signaling for the full year.

The divergence highlights a key tension: conventional wisdom expects policy restraint to persist longer, but economic fundamentals—specifically employment challenges—may force the Federal Reserve’s hand toward faster normalization than typically anticipated.