Moody's Economist Predicts Fed Rate Cuts Despite Inflation Concerns

Mark Zandi, Chief Economist at Moody's Analytics, predicts the Federal Reserve will cut interest rates next week despite inflation remaining above target. Current inflation sits at 2.9%, about 0.5% above the Fed's goal. However, Zandi argues that labor market weakness will override inflation concerns.

The job market has essentially stalled, with job growth flat and workforce revisions showing shrinkage for the first time since 2020. He warns of a potential 'labor recession' and describes the economy as 'clinging to the edge of the cliff.' Nearly one-third of U.S. GDP comes from states at high recession risk, with the Washington D.C. area particularly affected by federal job cuts.