Fed's Hoenig Looks Ahead to "Timely" Rate Hikes

DENVER (Reuters) - The Federal Reserve must be ready for "timely" increases to benchmark interest rates given a troublesome inflation outlook and an economy that looks poised for stronger growth in the second half of 2008, Kansas City Fed President Thomas Hoenig said on Tuesday.

In remarks to the Economic Club of Colorado, Hoenig hinted that he would not support more cuts to the Fed's benchmark interest rates at a time higher inflation could be getting entrenched in the economy.

"A sharp slowdown in growth has put the economy at the brink of a recession while, at the same time, rising commodity prices have caused inflation pressures to rise considerably," Hoenig said.

...

"These increases are beginning to generate an inflation psychology to an extent that I have not seen since the 1970s and early 1980s," he said.

Edited by milbank, 06 May 2008 - 10:31 PM.