Moody's economist Zandi expects gridlock after Democrats win control of Congress

Zandi says households won’t feel better until gas and mortgage rates fall

Mark Zandi, chief economist at Moody’s Analytics, said he does not anticipate major economic policy changes next year now that Democrats are set to control Congress, describing the likely outcome in an interview with NPR as gridlock.

“I don’t,” Zandi told host Leila Fadel when she asked whether he expected major economic policy changes. “You know, I think gridlock’s the word.”

The interview, published Friday, ranged from the monthly jobs report to the Iran war’s effect on energy prices to the Federal Reserve’s independence. Fadel said earlier in the program that companies added more jobs than expected last month. Zandi called the report good news, saying the economy is “creating a lot of jobs” and unemployment is down. “Four-point-one percent is — I’ll take it,” he said. “I mean, that’s pretty close to what you consider full employment.”

He then listed what the headline numbers obscure. “There’s a lot of blemishes, though,” Zandi said. Hiring remains slow, particularly for young people, he said, and wage growth is the metric that matters most to workers who already have jobs. “They want to make sure that their wages are rising at a pace that’s faster than inflation, and that’s not happening,” he said.

Zandi also cautioned against reading too much into a single month. “These monthly numbers go up and down and all around,” he said, recalling that the prior month’s figures were weak. The latest report, he said, is “making a case, but it’s overstating the case.” The economy, he said, is “OK, but not as good as these numbers might suggest at this point.”

Asked what it would take for Americans to feel that basic costs are affordable, Zandi pointed to prices rather than payrolls. People will not feel good about the economy until inflation comes in, he said. “Until gas prices are back closer to $3 a gallon, as opposed to over four, until mortgage rates are back down closer to 6 instead of over 7%,” he said, households will keep feeling squeezed by groceries, health care and the broader cost of living. It is really all about the cost of living and inflation, he said — “that has to turn the corner.”

He traced that squeeze to the Iran war. “That’s what’s behind all this. That has to come to an end,” Zandi said, adding that unless inflation comes in, “I don’t think people are going to feel very good about what’s going on.”

On what Democrats can do with their new majorities, Zandi described a narrow path. “They control Congress, but, you know, to get anything really done legislatively, they need to get the president on board, and that’s going to be a pretty heavy lift,” he said, citing the political situation. A wind-down of the war that pushed oil prices lower in the near future “would be a big deal,” he said. Lawmakers can hold hearings and apply political pressure, and they may be able to influence the funding that goes to the military to prosecute the war, he said. “Congress can’t end the war. They need the president to do that.” The war is expensive, he added: “It’s almost $50 billion in total cost.” Whether it winds down, he said, is a decision only the president will make.

Fadel noted that the president has talked about vetoing legislation but also about working with Democrats. Zandi said the standoffs that require legislation — the budget and the Treasury debt limit — could open room for other priorities, including what he described as the Democratic Congress’s interest in “bringing back the Affordable Care Act subsidies” and rolling back cuts to the SNAP food assistance and Medicaid programs. Even so, he said, “that’s going to be very difficult in the current political environment. So I don’t expect a lot.”

Asked about the Federal Reserve, which Fadel noted meets next month and has been under pressure from President Trump to cut interest rates, Zandi said he is “very much more encouraged” about the central bank. He said the president has “been pounding the drum about lowering interest rates” and has worked to change the people on the Fed to be more consistent with his perspective. While there has been a lot of concern about Fed independence, he said, the confirmation requirement protects the institution: any nominee must clear the Senate. “They will have to approve the nominee that the president puts forward, and they’re not going to approve anybody that’s not consistent with Fed independence,” he said.

“We want a Fed that’s independent that sets monetary policy interest rates based on the economy, not based on politics,” Zandi said.

He said he expects inflation to fall over the next two years, helped by a war he expects to wind down without a formal resolution and by a Fed he said is working hard to get inflation back down. “I don’t think there’s going to be a nice clear ending here. My sense is it’s just going to fade away,” he said. “We’ll get more oil flowing, we’ll get gas prices down and we’ll start moving in the right direction.”

“I am optimistic that we will see inflation lower a year from now than today, and certainly two years from now, compared to today,” Zandi said.

For separate context, the Atlanta Fed’s Wage Growth Tracker, a composition-adjusted median measure of wage growth for continuously employed workers, stood at 3.9% as of Nov. 6, 2026, according to FRED. The interview did not cite a specific inflation rate for comparison.