Hoenig explains his objection to latest Federal Reserve policy statement

Nightly Business Report’s Susie Gharib interviewed Thomas Hoenig, President of the Federal Reserve Bank of Kansas City. Amongst many questions, Gharib asked Hoenig to explain his objection to the latest Federal Reserve policy statement. Hoenig basically wants the Federal Reserve to move back to a flexible policy stance. The current policy statement locks the Federal Reserve into maintaining a zero interest rate policy regardless of changing circumstances in the near-term. Here is some of what Hoenig had to say (click here to watch or download the full interview):

“I think what the Fed should be doing is, as I said, broadening it’s options. That is taking off restriction that it’s placed on itself because… Let’s say the economy grows more quickly that I even anticipate. We should be prepared to have the ability to make changes. Or if it does grow slower, then we can always extend this very low interest rate environment. The main thing is to be able to make choices in a timely manner and that’s what it’s all about…

…what I’m saying is that the language should be changed so that we’re not tying ourselves to language that says we won’t do anything for an extended period, when in fact events are changing. The economy is strengthening. I think those are really… what I’m trying to say is maximize your options as a policy maker. I don’t think necessarily, until we get the data coming in more in terms of our future signaling of what we do, but what we ought to be doing is very clearly saying that our policies have to have the ability to change as the economy changes.”

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