Federal Reserve Barkin: Positive expectations for 2025, no need to take previous restrictive measures

On January 4, in a prepared speech, the Federal Reserve's Barkin said his base case for 2025 was positive: "I expect more upside to growth than downside." He added that expectations of economic expansion may be responsible for the recent pick-up in business optimism. His optimism about the economic outlook is in part due to his belief that the growth momentum in consumer spending is likely to maintain healthy economic growth in the coming months. "With business optimism running high and labour supply unlikely to continue to grow so strongly, the current labour market balance is more likely to move in the direction of hiring rather than layoffs," Barkin said. He also predicted that the emergence of more cost-conscious consumers in recent months would put pressure on companies to limit price increases, which should continue to weigh on inflation. But he also noted that inflation had not returned to the Fed's 2 per cent target: "We have more work to do, but we don't think we need to be as restrictive as before to get the job done."