#Balkin: Rate cut expectations weaken#

Federal Reserve Governor Barkin recently gave 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. While he is optimistic about the economic outlook for 2025, believing that the upside potential for growth outweighs the downside risks, and expects consumer spending growth to continue to support healthy economic growth, he also noted that inflation has not yet returned to the Fed's 2% target and that further action is needed to control inflation. Barkin believes that the current labor market balance is more likely to shift towards hiring rather than layoffs, that business sentiment is high, and that labor supply is unlikely to continue to grow as strongly. He also noted that consumers' recent focus on cost will put pressure on businesses to limit price increases, which should continue to dampen inflation. Overall, Barkin's speech suggests that the Fed has become less optimistic about interest rate declines, but remains optimistic about the economic outlook and expects to continue taking steps to control inflation in the future.