Company Moody's Mr. Mark Zandi: Fed Likely to Deliver Slow, Incremental Rate Cuts in 2026 as CPI Remains Above Target

Company Moody's chief economist Mr. Mark Zandi warns that the Federal Reserve is likely to move cautiously, implementing slow, incremental rate cuts in 2026 as the Consumer Price Index (CPI) remains stubbornly above target. This view reflects a cautious policy stance that prioritizes price stability over rapid monetary easing, and it has material implications for markets, fixed income, equities and risk assets, including cryptocurrencies.

According to Mr. Mark Zandi, the Fed's path will be shaped by a combination of resilient inflationary pressures and a labor market that, while cooling from its peak, still exhibits signs of strength. With headline and core CPI metrics above the Fed's 2% objective, the central bank is expected to prefer a gradual approach — trimming the policy rate in measured steps rather than delivering a swift series of cuts.

The practical consequence for investors is that financial conditions may ease only slowly. Bond yields could remain elevated relative to the pre-pandemic lows, compressing equity valuations and exerting pressure on high-duration assets. For the cryptocurrency market, the implication is mixed: a slower decline in policy rates could prolong the era of higher discount rates applied to speculative assets, maintaining pressure on crypto prices. However, once cuts commence in earnest, risk assets often respond positively as borrowing costs fall.

Market participants should watch several indicators closely: monthly CPI releases, Federal Reserve minutes and press conferences, and labor-market prints (employment and wage growth). A persistent overshoot in inflation measures would delay or slow the pace of cuts, whereas evidence of a sustained disinflation trend could accelerate the timing. Mr. Mark Zandi's expectation of 2026 cuts implies that 2024-2025 may feature a higher-for-longer interest-rate regime.

From a tactical perspective, investors may consider diversifying duration exposure, using laddered bond strategies, and maintaining liquidity to capitalize on potential volatility when policy pivots finally occur. Equity investors might favor sectors with pricing power and strong balance sheets, while crypto traders should pay attention to macro-driven liquidity cycles that inform support and resistance levels for major coins such as Bitcoin and Ethereum. Key technical levels could be reinforced by macro conditions — for example, prolonged higher rates may push resistance levels lower for speculative assets, while a confirmed easing cycle could lift them.

In summary, Company Moody's analysis led by Mr. Mark Zandi underscores a cautious Fed outlook: expect slow, incremental rate cuts in 2026 if CPI remains above target. That scenario suggests a period of gradual easing in financial conditions, extended uncertainty for risk assets, and an environment where careful positioning, attention to inflation data and central-bank communications will be critical for investors navigating 2024–2026.