Federal Reserve Bank of Kansas City President Thomas Hoenig said the central bank should begin withdrawing its monetary stimulus as part of efforts to “calm” concerns about inflation in the U.S.
Americans are starting to think about and experience rising prices more, and last week’s increased inflation projections by central bank officials “trouble” Hoenig, the Fed regional bank chief said to reporters today in Washington.
At the same time, there is a “pretty high” likelihood that the economy will keep expanding after growth in the first quarter was weaker than anticipated, Hoenig said. Hoenig, who opposed all eight Fed monetary-decisions in 2010, favoring tighter credit, reiterated his call to start raising the benchmark interest rate to 1 percent and then further as the economy recovers.
The Fed has a “very accommodative” monetary policy now and must be “mindful” of the dollar’s status as the main world reserve currency, said Hoenig, 64, who retires Oct. 1 after two decades as chief of the regional bank. He doesn’t have a vote this year on decisions by the policy-setting Federal Open Market Committee.
The FOMC said April 27 after a two-day meeting that the economy is recovering at a “moderate pace” and a pickup in inflation is likely to be temporary. Fed officials agreed to finish $600 billion of bond purchases on schedule in June.
Fed Chairman Ben S. Bernanke, speaking on April 27 at his first-ever regular press conference, signaled that the central bank will maintain its record monetary stimulus after June and indicated that the need to contain inflation means further easing is unlikely.
Hoenig spoke with reporters after giving a speech at the Independent Community Bankers of America’s Washington Policy summit.
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