WASHINGTON - Kansas City Federal Reserve President Thomas Hoenig Tuesday repeated his charge that the Fed’s continued accommodative stance is fueling inflation fears, warning the central bank cannot have zero interest rates indefinitely and not encourage inflationary expectations to grow.
Despite this, Hoenig told reporters following remarks at an Independent Community Bankers Association event in Washington that he expects the economy to continue to grow.
“My issue is as you let monetary policy remain highly accommodative, you do begin to raise the specter of inflationary pressures,” he said. “We have to be mindful of that.”
Hoenig pointed to his record as a voting member of the policymaking Federal Open Market Committee, calling it a sign of his concern that the Fed is getting complacent with regards to inflation.
Casting back to the Federal Open Market Committee’s assertion in its April 27 statement that the effects of rising energy and other commodity prices on inflation will be transitory, Hoenig said it will be transitory “if monetary policy adjusts.”
Hoenig said he was troubled by the fact that inflation worries are dominating the public consciousness, and said the Fed needs to take actions to ensure it does not carry forward.
The Fed needs to slowly remove its accommodative policies he said, and therefore calm inflationary fears. “If we don’t do that then I think they will build over time.”