Economist Mark Zandi says bond investors are doing the Fed's job, argues against more rate hikes

Key facts

• Bond investors are already doing the Fed's work by increasing borrowing costs, according to Mark Zandi.
• Zandi views further rate hikes as a mistake that risks running the economy aground.
• He noted that rate hikes cannot fix problems with oil supply.
• Zandi believes higher oil prices will undermine real wages and consumer spending.

Moody's Analytics chief economist Mark Zandi stated on Monday that the Federal Reserve should refrain from further interest rate hikes. He argued that bond investors are already effectively performing the Fed's task of tightening financial conditions. Zandi pointed to the current volatility in the 10-year Treasury yield around 5%, mortgage rates firmly above 7%, and widening corporate bond spreads as evidence of this. He warned that additional rate increases could pose significant risks to a fragile US economy, particularly amidst high macro and geopolitical uncertainty, including surging global oil prices.