Hoenig Says Fed Must Raise Rates to Create a ‘Stable Economy’
“I believe that moving rates modestly off of zero, where they have been since December 2008, still represents highly accommodative monetary policy,” Hoenig said today in the text of remarks at a real estate conference in New Orleans. “More importantly, such action is necessary if we are to ensure a more stable economy that can thereby foster a more sustainable housing market.”
The Federal Open Market Committee on Nov. 3 said it will buy an additional $600 billion of Treasuries through June, expanding record stimulus after it failed to bring down an unemployment rate stuck near a 26-year high. Hoenig this week cast his seventh straight dissent, the most at consecutive regular policy sessions since 1955.
Hoenig was concerned the “continued high level of monetary accommodation” may “destabilize the economy” by increasing long-term inflation expectations over time, the FOMC statement said.
“With regard to promoting housing through interest rate policies, I have many times publicly expressed my views about the dangers of using monetary tools and the Federal Reserve’s balance sheet to pursue low interest rates and fund mortgage- backed securities,” Hoenig said.
“For home financing to follow a path that is sustainable over time, the Federal Open Market Committee must begin taking steps to normalize monetary policy,” he said.