KANSAS CITY, Mo. — Federal Reserve Bank of Kansas City president Thomas Hoenig said the central bank must “become more resolute” in raising interest rates and shrinking its assets to avoid stoking inflation as the economy rebounds.
“As we become more confident that we are at the bottom of the recession and are moving into recovery, we must become more resolute in systematically reducing our balance sheet and raising interest rates to levels we might all agree are more in line with the economy’s long-run growth path,” Hoenig said in an Aug. 6 speech to the Kansas Bankers Association.
The Kansas City Fed, whose district includes Colorado, released the text of the remarks Saturday.
With signs that the worst U.S. recession in seven decades is leveling off, one of the Fed’s “major challenges” will be deciding how to tighten credit without harming a recovery or sparking inflation, said Hoenig, 63, the longest-serving current Fed policymaker.
The Fed cut its main rate almost to zero in December, and Hoenig said the central bank’s monetary stance “will provide significant stimulus into 2010 and beyond.”
