Fed's Hoenig Says U.S. Will Emerge From Crisis With a Stronger Economy

By: • Tue, Sep 30 2008, 8:36 AM

The Federal Reserve's Thomas Hoenig said he will be more anxious than others to raise rates when feasible. The Bank of Kansas City President was speaking at a bank-sponsored forum in Nebraska.

Hoenig said inflation in the U.S. at 5.5% is too high, and will have a long-run impact on the economy. High commodity prices have put pressure on finished goods prices, he said.

He said the Fed's huge injections of liquidity are not inflationary for now, but "if we fail to remove liquidity in a timely fashion, inflation could bubble."

Hoenig said he detects a "definite sense the sky is falling," but said that the U.S. will work through the crisis and emerge with a stronger economy.

He said the U.S. financial system needs to be restructured, and that the Fed should have been more vigorous in the supervision and regulation of banks.

Nevertheless, he said, commercial banks are still a healthy place to keep your money.

He said consumption needs to be balanced and will be sluggish into 2009.

He said the imperative for monetary policy in the long run is to keep the value of the U.S. dollar.