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Wednesday, April 07, 2010

Kansas City Fed's Hoenig Urges Raising Fed Funds Rate "soon"

by Calculated Risk on 4/07/2010 02:10:00 PM

From Kansas City Fed President Thomas Hoenig: What about Zero?

Under [an alternative] policy course, the FOMC would initiate sometime soon the process of raising the federal funds rate target toward 1 percent. I would view a move to 1 percent as simply a continuation of our strategy to remove measure that were originally implemented in response to the intensification of the financial crisis that erupted in the fall of 2008. In addition, a federal funds rate of 1 percent would still represent highly accommodative policy. From this point, further adjustments of the federal funds rate would depend on how economic and financial conditions develop.
Hoenig has dissented at the last two FOMC meetings urging the removal of the "extended period" language from the FOMC statement. For some reason, market participants keep thinking the Fed will raise rates soon (last summer it was by the end of 2009, this year it was by summer). Based on history, it is unlikely the FOMC will raise rates this year.