Thomas Hoenig, president of the Kansas Fed, fully spread his hawkish wings today. In a speech titled “the high cost of exceptionally low rates,” he called for the Federal Reserve to raise rates to 1 per cent from near zero by the end of the summer.
I have no illusions about the challenges of moving away from zero. But in my judgment, the process should begin sooner to avoid the danger of having to over compensate later, as so often happens in policy.
Dennis Lockhart, president of the Atlanta Fed, didn’t go as far as Mr Hoenig, but took a step toward signaling he would be willing to consider removing the Fed’s “extended period” pledge. “The time is approaching when it will be appropriate to consider recalibrating interest rate policy,” he said, but he did not think that “that time has yet arrived.”