#Balkin: Rate cut expectations weaken#

Federal Reserve Governor Barkin recently gave a speech in which he expressed caution about expectations of 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 believes 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, so the Fed still has work to do. Nevertheless, Barkin believes that it will not be necessary to take as restrictive measures to control inflation as in the past. He expects that strong business optimism and slowing labor supply growth will push the labor market toward hiring rather than layoffs, while consumers' focus on costs will also encourage businesses to limit price increases, thus continuing to put downward pressure on inflation. Overall, Barkin's remarks suggest that the Fed has become less optimistic about interest rate declines, but remains optimistic about the economic outlook and believes that inflation can be controlled through more moderate measures.