Moody's Zandi Warns Fed Rate Hike Would Be a Mistake as Bond Market Tightens

Moody's Chief Economist Mark Zandi warned Monday that another Federal Reserve rate hike would be a "mistake," arguing bond investors are already doing the Fed's tightening work ahead of the remaining two FOMC meetings this year. In a post on X, Zandi said the 10-year Treasury yield is swinging sharply near 5%, fixed mortgage rates are holding above 7%, and corporate bond spreads continue to widen — rising borrowing costs that are materially restraining economic activity. "If rates don't come down soon, it will cause real damage," he said. Zandi also flagged geopolitical risk to inflation ahead of this week's FOMC meeting. Oil prices are climbing toward wartime highs amid tensions with Iran, which he said would intensify inflation pressure, but a hike cannot fix an oil supply problem. Higher crude prices, he added, would further erode real wages and consumer spending. He said he had already called the Fed's September rate increase a "serious mistake."