Mark Zandi (Mark Zandi), chief economist at Moody's Analytics, said that it is best for the Federal Reserve to cut interest rates as soon as possible because if interest rates do not fall, there is a risk that some parts of the economy will “collapse.”

In an interview last Thursday, Zandy said that if the Federal Reserve does not lower interest rates in the next few months, there may be a series of consequences. He warned that maintaining current interest rates increases the risk of a recession and could reveal “other cracks” in the financial system.

The top economist said, “Interest rates are corroding the economy. They consume the economy, and at some point, problems may occur at some point. Now (the Federal Reserve) is taking the risk that officials are weakening the economy and causing a recession to occur. If I had the initiative one day, I would choose to cut interest rates now because I think the economy really needs this kind of relief.”

Zandy pointed out that although the strength of the economy indicates that the US is still far from falling into recession, higher interest rates are already having an impact on the economy. He pointed out that rising borrowing costs have led to slow loan growth and are “eroding” the credit environment, which may put pressure on banks' balance sheets.

Zandy mentioned the collapse of regional banks last year. The initial collapse of Silicon Valley Bank triggered a brief banking crisis, which led to the collapse of two other banks. “With interest rates continuing to be high, this is what I'm worried about,” he said.

As borrowing costs remain high, other market commentators have warned of the possibility of more unrest in the banking sector. Billionaire investor Barry Sternlicht (Barry Sternlicht) predicts that the US may face bank failures every week, partly due to the impact of high interest rates on commercial real estate loans.

But Federal Reserve officials seem prepared to keep interest rates high for longer, as the Federal Reserve is looking for more evidence that inflation is falling towards its 2% target. Prices have risen more than expected in the past three months, with inflation of 3.5% in March.

Zandy predicts that the Federal Reserve may wait another two to three months before taking steps to relax monetary policy because the Fed is waiting for the inflation data to cool down.

The market is watching the April inflation data to be released next week, but hopes for aggressive interest rate cuts this year have been dashed. According to the CME Federal Reserve's observation tool, investors currently expect to cut interest rates only once or twice by the end of 2024, compared to six at the beginning of the year.

Editor/Jeffrey