Moody's Zandi Warns of US Economic Recession Due to Prolonged High Interest Rates

Mark Zandi, chief economist at Moody's, warned that the Federal Reserve's interest rate hikes have begun to have a tangible impact on the US economy. Zandi diagnosed that if high interest rates persist, the economy could fall into a serious recession. The Fed raised the benchmark interest rate by 0.25 percentage points to a range of 3.75% to 4.0% on September 16, and financial markets are reflecting expectations of 3 to 4 additional rate hikes over the next year. The yield on 10-year US Treasury bonds has risen to 5.22%, and the rate for 30-year fixed-rate mortgages has reached 7.5%. Zandi projected that if the high interest rate trend does not end within a few months, the economy will face significant difficulties. He warned that if additional rate hikes are enforced, there could be a chain of bankruptcies among marginal firms, and household interest burdens would also increase. However, he assessed that big tech companies investing in AI could absorb the costs of high interest rates. Zandi mentioned that rising rates will affect stock market valuations and added that poor performance from key AI companies could have a significant impact on the market.

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