SANTA FE — Federal Reserve Bank of Kansas City president Thomas Hoenig said he is in a “wait-and-see-mode” on interest-rate policy and expects the economy to grow about 2 percent over the long run.
Central bankers must be “mindful” about both the risks of slowing growth and accelerating inflation, Hoenig said in his first remarks since casting the sole vote against lowering interest rates last month.
“My view is that we should go cautiously,” he said Thursday. “We want to be careful.”
The comments by the chief of a region that includes Colorado reinforce the message of Fed policymakers that the central bank is wary of lowering borrowing costs further as inflation pressures rise. A government report Thursday showed that a jump in energy costs spurred U.S. consumer prices to their biggest year-on-year increase since August 2006.
Hoenig broke from the rest of the Federal Open Market Committee on Oct. 31, preferring to keep the benchmark U.S. interest rate at 4.75 percent. The majority voted to lower the rate by a quarter-point to 4.5 percent to cushion the economy from the housing recession that may extend into next year.
“Hoenig’s not likely to dissent if he were the only one with that view,” said Robert Eisenbeis, the Atlanta Fed’s former research director, who estimates he sat in on 75 FOMC meetings from 1996 to 2006. “For him to dissent, he must have felt there were important issues that needed to be aired.”
Fed officials have lowered rates twice in the past two months after the August credit collapse and deepening housing recession threatened to hurt spending. Policymakers said in their Oct. 31 statement that after the action, the most aggressive easing since 2001, risks were “roughly” balanced between growth and inflation.
