NEW YORK – The fed funds rate can’t remain zero forever, and it should be raised “sooner rather than later” Federal Reserve Bank of Kansas City President Thomas Hoenig said today.
He noted that a 1% rate would still be accommodative, but raising the rate to 1% from zero “can’t be done overnight.
"I think we shouldn't be guaranteeing the markets a zero rate for an extended period," Hoeing said on CNBC's "Squawk On The Street.". "I think the crisis of a year ago has passed. We're in recovery. 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."
He added, "I think [rates] could be higher and the effects would be very minor if you could do it gradually. I think we should start that process sooner rather than later."
"When you have zero rates that go on indefinitely, you are inviting future problems," Hoenig said.
"We know that zero is non-sustainable...the market already knows that," Hoenig said.
