Hoenig: “I DON'T SEE THE BENEFITS” Of QE2

Kansas City Federal Reserve Chair, Thomas Hoenig, recently sat down to speak with FOX Business Network's Peter Barnes about his views on the economy, interest rates, and quantitative easing.

When asked about being the lone dissenter on the Federal Open Market Committee (FOMC), he said, “They [his colleagues at the FOMC] have to speak for themselves. My point is low interest rates did not cause this crisis and low interest rates, if we continue them on, will have the effect over time of creating new imbalances and is basically harmful for the long-term recovery of the economy.”

When asked about quantitative easing, Mr. Hoenig noted, “As I look at quantitative easing, I don't see the benefits. We're at historically low rates and we go down another 20 basis points and we're going to turn things around, against the risks that are out there in terms of the imbalances, in terms of our own independence, in terms of the long run inflation issues that are not immediate but are out there. Those are the tradeoffs that we have to really carefully consider.”

He added, “We can't control everything. There are a lot of other things affecting this economy and those have to be recognized. For example, the uncertainty that is in the market place. The uncertainty around taxes. The uncertainty around health care. The uncertainty around regulatory reform. Those are all impacting the economy and monetary policy is not an instrument that can offset everything else that affects the economy. And when you try to and use it in that way, and try to overuse it, you get bad outcomes too often. And that's what we need to be cautious about.”

To see the full interview, please click here.