As Expected, Fed's Hoenig Says He Opposes QE2

The Kansas City Fed president Thomas Hoenig spoke today, reiterating his steadfast hawkish position that he opposed further easing by the Fed and favored the fed funds rate hike to 1%.

I don't think much of him. He is just as clueless as the rest of the Fed.

As a FOMC member who has consistently voted against the majority within the Fed, Hoenig said:

1. The recovery is proceeding modestly;

2. The Fed should raise benchmark rates to 1 percent and hold them there to see how the recovery proceeds;

3. The Fed must also keep an eye on its mandate to maintain long term price stability. As the economy continues to improve/strengthen, there will be this enormous liquidity and there will be tendencies for inflationary impulses to rise.

I have issues with all three.

1. What "recovery"? Hoenig must be seeing a different set of data than his colleagues, court economists and Wall Street analysts. I do not believe he is seeing the real world; I don't expect him to be, but what data is he seeing?

2. Just as the majority of the Fed pushing for QE2 and ZIRP as far as eyes can see have no clue, neither does Hoenig. He is saying "Let's raise the rate and see what happens. If the economy tanks, oopsy."

3. The Fed's mandate has morphed into something else, in case Hoenig doesn't know. These days, the mandate is not price stability but to boost up inflation to the "desirable" level.

The Dallas Fed's Fisher also spoke today, who sounded like he was sitting on the fence for now regarding QE2.

The Fed's "good banker, bad banker" routine is getting tired. I have to admit I don't know any more which ones are good and which ones are bad. They seem all bad for the real economy, and we can't do anything about it.

Why? The Fed is "independent", remember?

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