Hoenig says the Fed’s policy on rates is wrong

THE Federal Reserve’s most vocal internal critic yesterday pushed back against the US central bank’s effort to control a sometimes-dissonant message, saying it is the duty of those who disagree to vote their conviction.

Thomas Hoenig, president of the Kansas City Fed and a known inflation hawk, said the US economy is recovering remarkably well given the depth of the downturn, and repeated his view that the Fed’s loose monetary policy risks provoking bubbles or inflation in the future.

The bank’s lone dissenter, who has repeatedly and openly opposed the Fed’s policy of ultra-low interest rates, not only stuck to his views but also took a jab at those at the Fed who are concerned about the divergence of view on policy. “The idea that a dissenting vote is confusing, counterproductive and generally undesirable is unhealthy,” Hoenig told The Central Exchange, a women’s business advocacy group. “If I had failed to express my views with my vote, I would have failed in my duty.”

Minutes from the Fed’s December policy meeting, published on Tuesday, contained a nod to the internal effort, led by vice chair Janet Yellen, to review the central bank’s communications guidelines for policymakers. Hoenig, who retires in October and will no longer have a vote this year on the Federal Open Market Committee, expects the US economy to grow 3.5 to four per cent annually over the next two years.