"The risk of the Fed is asymmetric: the risk of cutting too early and inflation flaring up is much worse than the risk of staying higher and going into a mild recession," he said.
Traders are betting that the Fed will hold interest rates steady for three more meetings before starting to cut interest rates in May - earlier than previously expected.
Vanguard, which manages $7.6 trillion in assets, expects gross domestic product growth next year to be 0.5%, with one or two quarters of negative growth.
The Fed will likely cut rates by 100 to 150 basis points next year, said Aliaga-Diaz.
In coming meetings, the central bank will likely keep interest rates on hold but it will keep open the possibility of additional hikes, he said.
Roger Aliaga, Diaz, Aliaga, Davide Barbuscia
Federal Reserve, Vanguard, Reuters, Traders, Thomson