Former Kansas City Federal Reserve president Thomas Hoenig warned that inflation was “more than temporary” as Americans grapple with sky-high food and energy bills before Thanksgiving. Hoenig appeared on Morning With Maria Tuesday to discuss how the Federal Reserve is facing challenges in dealing with high consumer price levels in the short and long term.
THANK YOU DINNER COST JUMPING WITH INFLATION ON THE MENU
THOMAS HOENIG: I think the Fed needs to start realizing that this is more than temporary, there are of course temporary elements in terms of logistics. But there is much more than that in terms of a long history of monetary policy that has been very accommodating. Long history of asset prices, not just bubbles but generally rising asset prices. That’s inflation in a sense, the Fed has to start with it. And then I think the Fed is really challenged, with the amount of new spending that has been done since COVID, nearly six trillion if I have the numbers, on COVID relief, and on top of that now we have the Infrastructure Act and we have the Build Back Better Act that is being considered. These are going to be big spending problems, and despite what you’d want to lead them to believe, these are likely going to be way higher than the estimates, especially this Build Back Better. Depending on how they extend some of these programs, it could be twice as much as reported … you haven’t really raised the taxes and [it’s] probably a good thing, but that means funding is even more dependent on the willingness of the Fed to buy stocks. So the Fed is in a really tough position when trying to target inflation. You have all of this … debt that you are expected to buy to keep interest rates low. That will only complicate the long-term inflation picture.
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