http://www.cnbc.com/id/38693128
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
However, Hoenig said Friday he believes the economy "barring specific shocks and bad policy ...should continue to grow over the next several quarters."
The Fed should raise its short-term target to 1 percent, pause to wait for the economy to adjust, and then raise it to 2 percent once it is clear the recovery is on a reasonable growth path, he said, repeating a proposal he has made before.
"I believe that zero rates during a period of modest growth are a dangerous gamble," Hoenig said Friday.
