Moody's Chief Analyst Slams Fed Rate Hikes as "Serious Policy Error," Tom Lee Voices Support

2026-09-15 15:27 (UTC+8)

Odaily News: Mark Zandi, Chief Economist at Moody's, posted on X this morning: "The odds that the Fed is making a serious policy error are uncomfortably high and rising. The market is all but certain the Fed will hike rates by 25 basis points at next week's meeting, and is pricing in expectations of further hikes ahead. However, current economic growth is already near potential output (real GDP growth at 2%) and at full employment (unemployment slightly above 4%). Yes, inflation is indeed elevated, currently running above 3%; but much of that stems from energy price increases and tariff shocks—supply-side shocks that rate hikes cannot resolve, and whose effects would naturally fade over time as long as inflation expectations remain stably anchored (which they currently are). If the Fed tightens monetary policy to bring inflation down faster, it would inevitably push economic growth below potential output—and that is nearly impossible to achieve without triggering layoffs, a spike in unemployment, and a worsening negative feedback loop. The thornier challenge is that only AI-related investment appears to be propping up the economy right now, while the non-AI real economy is already struggling. To hit its inflation target, the Fed must either suppress the AI boom or impose heavier pressure on other sectors of the economy. Neither is a good option. Of course, the Fed doesn't have to choose between the two—it could simply hold steady and wait for the right moment."

Tom Lee commented: "I agree with Mark Zandi. As he pointed out, the Fed doesn't have to choose between the two—it could simply hold steady and wait for the right moment. According to Goldman Sachs' estimates, supply-side shocks pushing up core PCE currently contribute about 1.75 percentage points, and will naturally fade by 100 basis points by early 2027 (down to 0.75 percentage points). Since core PCE will fall by 100 basis points on its own even without rate hikes, why hike at all?"