Moody's economists predict that the Federal Reserve will cut interest rates three times in the first half of 2026. How is this more aggressive than market expectations?

Moody’s Chief Economist Mark Zandi recently made a relatively aggressive forecast: the Federal Reserve will implement three rate cuts in the first half of 2026, each by 25 basis points. This prediction stands in stark contrast to the more moderate expectations of the market and Fed officials. What is the underlying logic? What does this divergence imply?

Where Zandi’s Aggressive Forecast Comes From

Drivers Analysis

Zandi’s forecast is primarily based on three judgments:

• Weak labor market: Job growth is insufficient to prevent the unemployment rate from rising, as companies face policy uncertainties (trade and immigration policy changes) and delay hiring
• Inflation uncertainty: Although inflation has eased, there are still variables
• Political pressure: Political factors faced by policymakers may also push for rate cuts

Zandi’s core logic is: as long as the unemployment rate continues to rise, the Fed will be forced to cut rates. This is a relatively straightforward causal chain.

Why “Aggressive”

Zandi’s forecast clearly exceeds the expectations of the market and Fed officials in terms of rate cut frequency. This divergence reflects differing judgments about economic prospects.

Key Issues Behind the Divergence

How Weak Is the Employment Market Really?

Zandi emphasizes the uncertainty faced by companies—especially changes in trade and immigration policies—that will cause firms to delay hiring decisions. This suggests that the unemployment rate may continue to rise into early 2026. If this judgment is correct, the Fed will indeed face pressure to cut rates.

However, the market’s moderate expectations may be based on another assumption: that the economy is resilient enough, and although the labor market faces pressure, it won’t deteriorate to the point of requiring frequent rate cuts.

Actual Impact of Policy Uncertainty

Related information indicates that there are concerns about the economic outlook in 2026—some believe “2026 will be a bear market year,” and the weak performance of US stocks (NASDAQ down 0.4%, S&P 500 down 0.3%) also shows signs of fatigue. This somewhat confirms Zandi’s point that uncertainty is indeed affecting market sentiment.

Potential Impact on the Crypto Market

Rate Cut Cycle and Liquidity

If Zandi’s prediction is correct, the three rate cuts in the first half of 2026 would mean:

• The Fed is injecting more liquidity into the market
• Borrowing costs decrease, potentially increasing the attractiveness of risk assets
• Historically, rate cut cycles often support risk assets like Bitcoin

But Variables Must Be Considered

• Policy uncertainty itself is a risk: Changes in trade and immigration policies could cause market volatility
• Rate cuts do not necessarily mean a bull market: If rate cuts are a response to worsening employment, overall market risk appetite may not truly improve
• Timing differences: The Fed’s actual actions may differ from predictions

Summary

Zandi’s forecast represents a more pessimistic view of the economy—anticipating frequent rate cuts to address employment deterioration. This contrasts with the market’s moderate expectations. The key point is: employment data in early 2026 will determine whether the Fed needs to take such aggressive rate-cutting measures.

For the crypto market, this divergence itself is a signal—there is considerable uncertainty about the economic outlook in 2026. Whether it’s Zandi’s aggressive forecast or the market’s cautious outlook, ongoing attention to actual data evolution is essential.