Top Economist Warns of Rising Risk of Fed Policy Mistake
Mark Zandi, an economist from Moody's, has expressed growing concern over the likelihood of a significant Federal Reserve policy error. As markets anticipate another rate hike at the upcoming FOMC meeting, Zandi warned that aggressive tightening could trigger layoffs and create a self-reinforcing economic downturn. Zandi noted that while inflation remains above 3%, much of it is due to supply-side factors like energy prices and tariffs—issues not easily addressed by interest-rate hikes. He highlighted the Fed's difficult balancing act: slowing AI-driven growth or putting more pressure on an already weakening non-AI economy, both of which could be harmful. The market remains divided over whether a rate hike will occur at this meeting. While some analysts expect it and believe it may initially trigger a sell-off before recovery, others argue the Fed might hold off unless oil prices rise significantly above $110 per barrel.
Topics: economic downturn risk Fed policy inflation Mark Zandi