#Balkin: Rate cut expectations weaken#

Federal Reserve Governor Barkin recently delivered a speech expressing caution about expectations for interest rate declines. He said that there is a growing recognition that long-term interest rates may not fall as sharply as previously hoped. While he is optimistic about the economic outlook for 2025, expecting more upside than downside to growth and believing that consumer spending growth will continue to support healthy economic growth, he also noted that inflation has not yet returned to the Fed's 2% target and there is more work to be done. Barkin believes that the current labor market balance is more likely to shift towards hiring rather than layoffs, with businesses exhibiting high levels of optimism, while labor supply is unlikely to continue growing as strongly. He expects that consumer focus on costs will put pressure on businesses to limit price increases, which will continue to dampen inflation. Nevertheless, Barkin emphasized that the Fed does not need to take as restrictive measures to control inflation as it has in the past. Overall, Barkin's remarks suggest that the Fed is cautious about expectations for interest rate declines and believes that further action will be needed to control inflation in the future, but that it will not be as aggressive as it has been in the past.