Aug 14, 2010
The Federal Reserve is undertaking a “dangerous gamble” by keeping rates at near zero for so long, and must start raising rates or risk damaging the nascent U.S. recovery, a top Federal Reserve official said on Friday.
“To be clear, I am not advocating a tight monetary policy,” Kansas City Reserve Bank President Thomas Hoenig said in the text of a speech to the Lincoln, Nebraska, Chamber of Commerce. “I am advocating a policy that remains accommodative but slowly firms as the economy itself expands and moves toward more balance.”
Hoenig has been the lone dissenter on the Fed’s policy-setting panel, which on Tuesday repeated the U.S. central bank’s pledge to keep interest rates extraordinarily low for an “extended period.”
The Fed took the further step of saying it would begin reinvesting cash from maturing mortgage bonds to buy more government debt. The decision reflected the Fed’s concern over the slowdown in the economic recovery it helped bring about by cutting rates to near zero in December 2008 and buying nearly $1.3 trillion in mortgage-linked debt to shore up the housing market.
This article was posted: Saturday, August 14, 2010 at 10:33 am