Fed Expected to Aggressively Cut Rates in Early 2026, Economist Predicts

According to Odaily, Moody's Analytics Chief Economist Mark Zandi anticipates that a weak labor market, inflation uncertainty, and political pressures will lead the Federal Reserve to aggressively cut interest rates in early 2026. While both market analysts and Federal Reserve officials expect only moderate easing next year, Zandi forecasts three rate cuts in the first half of the year, each by 25 basis points. Zandi explained that the continued easing of monetary policy will be driven by a persistently weak job market, particularly at the beginning of 2026. He noted that businesses will require more time to be confident that changing trade and immigration policies, along with other threats, will not catch them off guard before they resume hiring. He added, "Until then, job growth will be insufficient to prevent the unemployment rate from rising further. As long as the unemployment rate continues to climb, the Federal Reserve will cut rates." Zandi's prediction is notably more aggressive than the expectations of both the market and the Federal Reserve, which point to a slower pace of rate cuts.