Fed's Balkin: Positive expectations for 2025, no need for previous restrictive measures

In prepared remarks, Fed's Balkin said his underlying expectations for 2025 are positive: “I expect more upside than downside to economic growth.” He added that expectations of economic expansion may account for the recent pickup in business optimism. Part of the reason for his optimism about the economic outlook is that he believes the momentum in consumer spending is likely to keep the economy growing at a healthy pace in the coming months. Balkin said, “The current labor market balance is more likely to move in the direction of hiring than layoffs as business optimism is high and labor supply is unlikely to continue to grow so strongly.” He also predicted that the more cost-conscious consumers that have emerged in recent months will put pressure on businesses to limit price increases, which should continue to depress inflation. But he also noted that inflation is not yet back to the Fed's 2 percent target: “We have more work to do, but we don't think we need to be as restrictive as we have been in the past to get the job done.”