Moody’s chief economist Mark Zandi said the economy is already beginning to weaken after the Federal Reserve raised its benchmark policy rate and as markets anticipate further increases. The 10-year Treasury yield reached 5.22% on Monday after touching a 20-year high the previous week, while 30-year fixed-rate mortgage rates reached 7.5%, their highest level since spring 2024. Zandi said the economic impact will depend on how long rates stay elevated. If higher rates last only a few months, the conflict in Iran ends, oil prices decline and markets’ expected additional increases fail to materialize, the economy could absorb the pressure. If elevated rates continue into next year, he said, economic conditions could deteriorate sharply. Markets are pricing in three to four more rate hikes over the next year, including one in 2026, after the central bank raised rates by 25 basis points to 3.75%-4% on Sept. 16, its first increase in more than three years. Zandi warned that sustained higher rates could trigger corporate bankruptcies, increase costs for households with credit-card balances and home-equity lines of credit, and weigh on bond markets during a potential debt-limit confrontation next fall. He said technology giants investing in artificial-intelligence infrastructure may be better positioned because their high margins can absorb higher borrowing costs. Zandi also disagrees with the view that rising long-term yields primarily reflect strong economic growth, instead citing geopolitical tensions, market uncertainty and an added premium linked to the Federal Reserve chair’s lack of forward guidance. He does not expect higher rates alone to abruptly end the stock-market rally, but said they could gradually erode valuations and leave the market vulnerable if a major AI company such as Nvidia misses earnings expectations.