#Balkin: Rate cut expectations weaken#

Federal Reserve Governor Barkin recently delivered a speech in which he adjusted expectations for interest rate declines. He said that he is increasingly recognizing that long-term interest rates may not fall as sharply as previously hoped, a departure from the widespread market expectation of rapid rate declines. Despite this, Barkin remains optimistic about the economic outlook for 2025, expecting that the upside potential for growth outweighs the downside risks. He believes that consumer spending growth will continue, business sentiment remains high, and the labor market balance is more likely to shift towards hiring rather than layoffs. Additionally, he expects that consumer focus on costs will put pressure on businesses to limit price increases, thereby continuing to dampen inflation. However, Barkin also emphasized that inflation has not yet returned to the Fed's 2% target, so the Fed still has work to do, but it does not need to take as restrictive measures as it has in the past. Overall, Barkin's speech suggests that the Fed is cautiously optimistic about the economic outlook, expecting that interest rates will not decline rapidly, but also that overly aggressive measures are not necessary.