One day before policymakers meet in Jackson Hole, Wyo., Federal Reserve Bank of Kansas City President Thomas Hoenig on Thursday said there’s only so much the central bank can do to help the economy, and that the policy should pivot to focus on the country’s fiscal problems.
“We can’t do it all,” Hoenig, the central bank’s longest- serving policy maker, said in an interview with Bloomberg Television. “We have a problem in this country with debt” and “if we don’t turn to the long run, we will be dealing with overnight crises for as far as the eye can see.”
According to Bloomberg, Hoenig was joined by Dallas Fed President Richard Fisher in saying “monetary policy can’t be expected to cure all that ails the economy, and shouldn’t be used to target high unemployment.”
Hoenig told the news service it probably isn’t “a surprise” to learn that he would have dissented from the FOMC’s Aug. 9 decision to keep rates near zero through at least mid-2013. Hoening doesn’t vote on the Federal Open Market Committee this year.
“Monetary policy is an important tool, it is a valuable tool, but it is not an exclusive tool,” Hoenig said in the interview from Jackson Hole. “It does not solve all problems.”
Dallas’ Fisher was one of three regional bank presidents to dissent at the Fed’s most recent meeting this month, posing the most opposition on the FOMC in almost 19 years, according to Bloomberg. The Dallas Fed head joined Charles Plosser of Philadelphia and Narayana Kocherlakota from Minneapolis in advocating to keep rates low for an unspecified “extended period.”
Hoenig, who has led the Kansas City Fed since 1991, said in the interview that he would probably oppose the idea of the Fed taking further action to stimulate the economy. He said he still continues to support the central bank’s dual mandate for achieving price stability and full employment.
“The mandate is quite fine,” Hoenig said. “We need to follow the mandate.”