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Fed's Barkin (2027 voter) says as we move into 2026, it feels like the fog is starting to lift — or perhaps our eyes are just starting to adjust.

Barkin's comments reflect a shift toward optimism about the economy but underscore a cautious stance regarding future rate adjustments.

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Fed's Barkin (2027 voter) says as we move into 2026, it feels like the fog is starting to lift — or perhaps our eyes are just starting to adjust.

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  • "The road ahead is coming back into focus, and once again we are seeing an economy that remains remarkably resilient."
  • "This resilience has been enabled by strong underlying dynamics. Consumers have jobs, as I’ve said. With inflation down, real wages are now increasing. Asset values keep growing. Corporate earnings remain strong. In those circumstances, it’s hard to imagine consumers and businesses moving to the sidelines."
  • "As the inflation rate has fallen, we have been bringing rates back down toward neutral levels, reducing the fed funds rate 175 basis points over the last year and a half. I think of these cuts as having taken out some insurance to support the labor market as we work to complete the last mile to bring inflation back to target. So far, so good. But we know things change, and as they do, we remain ready to respond as appropriate."
  • "Near-term inflation expectations have fallen, suggesting more progress to come."
  • "Job growth has been narrow..." and "Low hiring hasn’t been translating into rising unemployment because the growth in labor supply has shrunk at about the same pace as labor demand. But slow job growth is not a comfortable place to be."
  • On the easing enacted over the last 18-months: "I think of these cuts as having taken out some insurance to support the labor market as we work to complete the last mile to bring inflation back to target. So far, so good. But we know things change, and as they do, we remain ready to respond as appropriate."
Context

As inflation expectations decrease and the labor market shows resilience, his emphasis on readiness to adjust policy suggests that the Fed is closely watching for any signs of change that could affect their course. The mention of easing measures as insurance indicates they are not fully committed to a permanent shift in rates, keeping the door open for adjustments based on evolving economic conditions.

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