Tags: Fed | Hoenig | Rate | Hike

Fed's Hoenig Urges Rate Hike Sooner Than Later

Tuesday, 02 Mar 2010 11:44 AM

A senior U.S. Federal Reserve official said on Tuesday that an extended period of ultra-low rates invites speculative behavior and is risky.

"When you have zero rates that go on indefinitely, you are inviting future problems," Kansas City Federal Reserve Bank President Thomas Hoenig said in an interview on CNBC.

"We know that zero is non-sustainable ... the market already knows that," Hoenig said.

Hoenig told CNBC that the Fed should raise interest rates sooner rather than later. He said he though it would be difficult to raise them right now, and the effects would be very minor if they were raised gradually.

"I think we shouldn't be guaranteeing the markets a zero rate for an extended period. I think the crisis of a year ago has passed. We're in recovery," Hoenig said.

"We can't predict the future and therefore we should not be giving guarantees. I think it'll help the market actually adjust if they know that rates can't be at zero forever — and shouldn't be," said Hoenig.

Hoenig is a voting member of the Federal Open Market Committee. He was the only Fed member who dissented on its latest decision to hold interest rates steady at near zero.


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A senior U.S. Federal Reserve official said on Tuesday that an extended period of ultra-low rates invites speculative behavior and is risky. When you have zero rates that go on indefinitely, you are inviting future problems, Kansas City Federal Reserve Bank President...
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2010-44-02
Tuesday, 02 Mar 2010 11:44 AM
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