#Balkin: Rate cut expectations weaken#

Federal Reserve Governor Barkin recently delivered a speech expressing 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 upside risks to outweigh downside risks 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 that continued efforts are needed to control inflation. 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 strongly. Additionally, he expects that consumers' focus on costs will put pressure on businesses to limit price increases, which will continue to dampen inflation. While Barkin is optimistic about the economic outlook, he emphasized that the Fed still needs to take steps to control inflation and said that restrictive measures are not needed as much as they were before. Overall, Barkin's remarks suggest that the Fed is cautious about expectations of interest rate declines, will continue to monitor inflation trends, and will adjust monetary policy based on economic conditions.