A top Federal Reserve official said Thursday the U.S. economy should grow at a modest pace for the next several years, but issued a harsh criticism of the U.S. central bank's just-concluded bond buying program.
"The outlook for the U.S. economy is that we will continue to grow at a modest pace of somewhere between 2.5 (percent), on a good quarter, 3 percent, at least in terms of next year and the year beyond," said Kansas City Fed President Thomas Hoenig.
Hoenig is one of the most outspoken critics of the Federal Reserve's exceptionally easy money policies. He is not a voter on the Fed's policy-setting panel.
The Kansas City Fed chief has persistently objected to the extent of the Fed's aggressive steps to support a weak recovery from a sharp recession that ended in June 2009. When he was a voter on the Fed's policy-setting Federal Open Market Committee in 2010, he dissented at every rate-setting meeting on the grounds that policy should be tighter.
He renewed his sharp criticism of Fed policies on Tuesday, calling the Fed's most recent bond buying initiative to stimulate economic growth -- QE2 because it was the second round of quantitative easing -- a back-handed funding of U.S. borrowing.
"QE2 was a monetization of $600 billion of debt," Hoenig told a conference on agriculture sponsored by his institution.
Top officials at the Fed deny their purchases of Treasuries were a deliberate monetization the U.S. debt. Chairman Ben Bernanke has said Fed purchases of Treasuries are aimed at lowering longer term interest rates and are the central bank's most effective tool for stimulating growth when short-term rates are near zero.
Hoenig's outlook for growth puts him squarely in the center of Fed forecasts for 2011, but at the low end for 2012 and 2013.
The Fed sees U.S. growth at between 2.7 percent and 2.9 percent this year, 3.3 percent to 3.7 percent next year, and 3.5 percent to 4.2 percent the year after that.
Hoenig offered an extremely gloomy prognosis for economic stability, telling his audience that he fears a repeat of when periods of ultra-accommodative monetary policy has resulted in either high inflation or the creation of a price bubble that burst with disastrous consequences.
The Kansas City Fed president's views differ from many policymakers at the U.S. central bank. Bernanke said last week that the Fed is ready to respond with more actions to spur growth if the recovery falters, although he made clear no action is imminent.
Atlanta Fed President Dennis Lockhart said on Monday that the central bank would likely keep its easy money policies in place until it saw some improvement in the labor market, where unemployment rose to a lofty 9.2 percent in June.
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