Tags: Hoenig Urges Lifting Fed Funds Rate to 1 Percent Amid US Recovery

Fed's Hoenig: Time to 'Take Away the Punch Bowl'

Wednesday, 02 Mar 2011 09:44 AM

Persistent U.S. fiscal deficits would hurt the economy and pressure the Federal Reserve to loosen monetary policy, Kansas City Fed President Thomas Hoenig warned Wednesday.

"When you have debts and deficits that run very rapidly over time, real interest rates do rise ... and when they do, it has the effect of slowing down investments, slowing down the economy," Hoenig told the Council of Foreign Relations.

"And what happens? Inevitably you turn to the central bank," he added, calling on the government to address its fiscal issues now, without ignoring entitlement issues.

Hoenig also said U.S. policymakers should start preparing the market for a lifting of interest rates back to 1 percent to avoid future inflation problems.

"I really want to take away the punch bowl before the room gets drunk because I think this punch bowl is a little bit spiked," Hoenig, who has repeatedly voiced dissent against the Fed's ultra-low monetary policy, said.

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Persistent U.S. fiscal deficits would hurt the economy and pressure the Federal Reserve to loosen monetary policy, Kansas City Fed President Thomas Hoenig warned Wednesday. When you have debts and deficits that run very rapidly over time, real interest rates do rise ......
Hoenig Urges Lifting Fed Funds Rate to 1 Percent Amid US Recovery
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2011-44-02
Wednesday, 02 Mar 2011 09:44 AM
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