Moody's analyst: Fed made mistake but won't cut rates until September

Mark Zandi, chief economist at Moody's Ratings, said Monday that the Federal Reserve “obviously” made a mistake in not cutting rates but will likely wait until the September meeting to respond.

“They clearly made a mistake,” Zandi told CNN’s Jim Acosta in an interview. “That's, now, I think, obvious to everyone — including them. And I think they're going to respond.”

“I don't think they're going to respond until the next meeting, when they all get together again and make a rate decision,” he continued. “That won't be until September.”

The interview comes amid mounting concerns about the strength of the U.S. economy. A weaker-than-expected federal jobs report Friday fueled doubts among investors and some policymakers about the Federal Reserve’s decision not to cut interest rates after months of cooling inflation.

The disappointing jobs report also contributed to a global stock-market sell-off that only intensified Monday.

The Dow Jones Industrial Average opened with a loss of 1,100 points, dropping 2.8 percent after the opening bell. Dow futures tumbled more than 1,200 points before the market opened. The tech-heavy Nasdaq composite fell 6.2 percent, and the S&P 500 index sank 4.2 percent after the market opened.

Zandi said he expects the Fed to respond “aggressively” but not right away. Doing so, he argued, could be “counterproductive,” and instead fuel concern that the economy is worse than it is.

“If they did something in between, you know, that might smack a panic or desperation. ‘What do they know that we don't know?’ And I think that might be counterproductive,” Zandi said. “And they don't need to, because the economy is still OK. It's still fine. It’s still creating a lot of jobs.”

“But I do expect in September that they will start cutting rates aggressively, you know, a half a percentage point and then more aggressively going forward, you know, in November, December and into next year, get that interest rate, that 5.5 percent down to something that's more consistent with, you know, an economy that is struggling a bit.”