Fed Should Exit Rate Policy Deliberately: Hoenig

Monday, 19 Apr 2010 09:55 AM

The U.S. central bank should exit from its extraordinarily accommodative monetary policy as deliberately as it can, a senior Federal Reserve official says.

Federal Reserve Bank of Kansas City President Thomas Hoenig told a Levy Economics Institute conference Friday that he would not want to disrupt markets with quick asset sales.

The Fed — the U.S. central bank — cut benchmark U.S. interest rates to near zero during the crisis and bought longer-term assets including $1.25 trillion of mortgage-backed securities, more than doubling its balance sheet.

Hoenig said he wants to leave the option open for removing the mortgage-backed securities from balance sheet through sales rather than just amortization.

Asked whether the Fed should raise reserve requirements, Hoenig said even discussing this at this point would cause unwanted uncertainty in the markets. But he said the topic should be revisited later.

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