Ahead of key economic data like Consumer Confidence and the Personal Consumption Expenditure (PCE) index due out this week, investors are still trying to gauge when the Federal Reserve will cut interest rates. Hopes for a rate cut as early as March have been dashed as Fed officials remain cautious. Moody's Analytics Chief Economist Mark Zandi joins Yahoo Finance Live to discuss when would be a good time for the Fed to initiate rate cuts in 2024.

Zandi says that with the Fed having "more or less hit its targets" on inflation and unemployment in its dual mandate — "[achieving] full employment" and cooling inflation closer to 2% — he hopes rate cuts are coming soon. With both metrics currently at favorable levels, Zandi says now could be a good time to cut rates without "pushing the economy into a ditch," referring to recession fears.

However, Zandi notes "the bar is higher" for the Fed, suggesting rate cut hesitation may stem from wanting even more "certainty" that markets will remain stable.

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Editor's note: This article was written by Angel Smith

Video Transcript

SEANA SMITH: The Federal Reserve expected to loosen monetary policy this year after bringing interest rates to their highest level in more than two decades. But we know sticky inflation strong jobs data and cautious commentary from the Fed is causing investors to reexamine the timing of that first rate cut. Now currently 20% of traders expect the Fed to cut in May. That's down from 28% just a week ago. And more data out, this week is going to help guide the Central Bank's decision, including the Fed's preferred inflation gauge, PCE, that's out on Thursday.

Here with more, we want to bring in Mark Zandi. He's Moody's Analytics chief economist. Mark, it's great to talk to you again. So talk to us just about where things stand today because you and I have talked many times in the past just about the timing of that first rate cut. The fact that the Fed right now seems to prefer the risk of staying higher for longer versus cutting too soon. Is that the right strategy?

MARK ZANDI: Well, if I were king for the day, Seana, I'd probably begin cutting rates sooner rather than later. Because at the end of the day, the Federal Reserve has more or less hit its targets, its dual mandate. It has two objectives. One is to achieve full employment. I think we're there, 3.67% unemployment rate would be consistent with that. And on inflation, we're not quite at target but within spitting distance, I mean, on a six-- take the PCE number that you mentioned.