Mark Zandi Predicts Three Fed Rate Cuts in Early 2026 as Jobs Weaken

A faster pace of interest rate cuts may be coming in 2026, according to Mark Zandi, chief economist at Moody’s Analytics. Zandi believes the Federal Reserve could surprise markets by delivering three quarter-point rate cuts in the first half of the year well ahead of current expectations.

Zandi points to a softening labor market, unclear inflation trends, and growing political pressure as the main reasons the Fed may feel compelled to act sooner rather than later.

Why Zandi Expects Faster Rate Cuts

In his outlook for 2026, Zandi said weak job growth will likely become the Fed’s top concern early in the year. Businesses, he noted, remain cautious about hiring as they wait for clearer direction on trade, immigration, and broader economic policy.

As long as hiring remains slow and unemployment continues to rise, Zandi believes the Fed will respond by lowering rates to support economic growth. In his view, this could result in three rate cuts by midyear.

Markets and the Fed See a Slower Path

Zandi’s forecast is more aggressive than what markets and Fed officials currently expect. Futures pricing tracked by the CME FedWatch suggests investors are pricing in only two rate cuts in 2026, with the first likely not arriving until spring and another possibly later in the year.

Fed policymakers themselves appear even more cautious. Recent projections from officials point to just one rate cut over the entire year, reflecting ongoing concerns about inflation and the risk of easing policy too quickly.

Political Pressure Adds Another Layer

Zandi also highlighted political dynamics as a possible accelerant. With former President Donald Trump continuing to push for lower interest rates and gaining influence over future Fed appointments, Zandi expects pressure on the central bank to increase.

As leadership changes take shape in 2026, Zandi argues that the Fed’s independence could face more strain, especially with midterm elections approaching and economic growth becoming a key political issue.

What This Means for Borrowers and Markets

If Zandi’s outlook proves accurate, earlier and deeper rate cuts could provide relief for borrowers, including homeowners, businesses, and consumers carrying variable-rate debt. Lower rates could also support housing activity and business investment after a sluggish period.

Still, uncertainty remains high. Inflation data, job reports, and global events will all influence how quickly the Fed moves.

Looking Ahead

The Fed’s next policy meeting is scheduled for late January, though markets currently see a low chance of a cut at that time. Whether Zandi’s forecast comes true will depend largely on how fast labor conditions weaken and whether inflation continues to cool.

For now, his outlook serves as a reminder that 2026 could bring sharper policy shifts than many expect especially if job growth fails to rebound. For direct financing consultations or mortgage options for you visit 👉 Nadlan Capital Group.