"Fed to cut interest rates at least twice next year... due to 'growth on thin ice'"

Mark Zandi, chief economist at Moody's Analytics, forecasted that the Federal Reserve (Fed) will implement at least two additional interest rate cuts next year. He said that although the U.S. economy appears solid on the surface, in reality it is continuing a 'growth on thin ice' with stagnant employment, and monetary policy support to prop it up is essential.

On the 25th (local time), Zandi told CNBC, "The Fed is more likely to engage in economic stimulus more aggressively than expected." He cited the odd imbalance in the U.S. labor market as the background for the rate cuts.

Zandi said, "While it is positive that layoffs are not increasing—weekly unemployment claims remain around 225,000—the problem is that companies have stopped hiring altogether." Actual job growth has remained flat, and the unemployment rate has risen to 4.6%, already exceeding his estimated full-employment level (about 4%). He warned, "Growth without employment is unsustainable, and this is a fragile structure that could lead to an immediate recession if consumption shrinks even slightly."

He also raised concerns about inflation indicators. Zandi pointed out that the Bureau of Labor Statistics (BLS) assumed no change in prices for October due to the government shutdown, distorting the figures. Moody's own analysis shows that actual inflation still stands in the 3% range. In other words, prices remain high, but the Fed will face a dilemma of having to cut rates 'reluctantly' to prevent cooling in the labor market.

He also identified artificial intelligence (AI) as a key variable for the 2026 economy. He said, "The primary driver supporting the 2025 economy was AI investment and the wealth effect of the asset market," but added, "If concerns about an AI bubble arise or the stock market undergoes a correction, consumers' spending power could fall sharply and the economy's growth engine could be damaged."