Moody's Chief Economist Mark Zandi recently made an interesting assessment — the Federal Reserve is very likely to start cutting interest rates next year, but don’t expect a radical move. He believes the economy is in a delicate balance, more like walking a tightrope than a booming economy.

In Zandi’s view, this means the Fed will adopt a cautious, gradual approach rather than large, rapid rate cuts. In other words, if you’re hoping for a series of rate cuts? You might have to wait.

Inflation remains the real "shield." Zandi straightforwardly states that the current CPI is actually closer to 3%, far from the Fed’s psychological target of 2%. Official data also confirms this — in November, the US CPI increased by 2.7% year-over-year, with core CPI reaching 2.6%. Both indicators are still above the Fed’s target range.

"Inflation is still noticeably above the Fed’s comfort zone," Zandi added, "although upward pressure may ease, there are risks on both sides, and policymakers are cautious."

For traders, this means the rate cut cycle may not come as soon as some expect, and the market should prepare for a longer period of higher interest rates.