Fed Keeps Rates "Exceptionally Low"; Hawk Hoenig Makes His Presence Known Voting Against Action
As expected, the Federal Open Market Committee decided to keep the federal funds rate at 0 to 1/4 percent. The FOMC made this decision despite information they have received showing that economic activity has continued to strengthen and that the deterioration in the labor market is abating.
The FOMC continues to anticipate that economic conditions "are likely to warrant exceptionally low levels of the federal funds rate for an extended period."
In today's announcement it was noted that there was a lone Fed member that voted against the decision to keep rates unchanged - Thomas M. Hoenig.
Mr. Hoenig, President of the Kansas City Fed, voted against the policy action saying he "believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted."
This was the first time a Fed member has voted against the group since January 2009, but at this time Jeffrey Lacker wanted the fed to get more aggressive not less. You have to go back to August 2008 to find a member that wanted to go against the grain and raise the federal funds rate. At that time it was Richard Fisher, but luckily the FOMC did not take his advise and the federal funds rate which was a 2 percent back then went down to 0 percent due to the financial crisis - where it sits today.
Mr. Hoenig didn't say he wanted rates raised today, but he is signaling that this should be done sooner rather than later.
Mr. Hoenig has been President of the Federal Reserve Bank of Kansas City since 1991 and is known as an inflation hawk. In March 2009, Hoenig delivered a speech "To Big Has Failed." Now that Mr. Hoenig is back as a voting member of the FOMC, due to its three year rotation, expect more votes from him raise the fed fund rate.
Now if Mr. Hoenig can get other fed members to join his bandwagon, 0% fed funds rate may be a thing of the past.
The FOMC continues to anticipate that economic conditions "are likely to warrant exceptionally low levels of the federal funds rate for an extended period."
In today's announcement it was noted that there was a lone Fed member that voted against the decision to keep rates unchanged - Thomas M. Hoenig.
Mr. Hoenig, President of the Kansas City Fed, voted against the policy action saying he "believed that economic and financial conditions had changed sufficiently that the expectation of exceptionally low levels of the federal funds rate for an extended period was no longer warranted."
This was the first time a Fed member has voted against the group since January 2009, but at this time Jeffrey Lacker wanted the fed to get more aggressive not less. You have to go back to August 2008 to find a member that wanted to go against the grain and raise the federal funds rate. At that time it was Richard Fisher, but luckily the FOMC did not take his advise and the federal funds rate which was a 2 percent back then went down to 0 percent due to the financial crisis - where it sits today.
Mr. Hoenig didn't say he wanted rates raised today, but he is signaling that this should be done sooner rather than later.
Mr. Hoenig has been President of the Federal Reserve Bank of Kansas City since 1991 and is known as an inflation hawk. In March 2009, Hoenig delivered a speech "To Big Has Failed." Now that Mr. Hoenig is back as a voting member of the FOMC, due to its three year rotation, expect more votes from him raise the fed fund rate.
Now if Mr. Hoenig can get other fed members to join his bandwagon, 0% fed funds rate may be a thing of the past.
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