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The Federal Reserve’s first Federal Open Market Committee meeting of 2010 brought a new voting lineup among regional Federal Reserve bank presidents. One hawkish president took the place of another hawk, and the transition appears to have been seamless — bringing a dissenting vote to the committee for the first time in a year.
The FOMC voted 9-1 to keep its interest-rate target unchanged at near zero and maintain its language that economic conditions “are likely to warrant exceptionally low levels of the federal funds rate for an extended period.” That wording has remained in the FOMC’s post-meeting statement since last March.
The lone dissenter, Kansas City Fed President Thomas Hoenig, “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,” the statement said.
Mr. Hoenig knows what it’s like to lead the Lone Dissenter Club. He last dissented in October 2007 — his second-to-last meeting in the voting lineup before this year — when he wanted the Fed to keep its rate target unchanged, rather than cut by a quarter point. But it’s the first time the FOMC has seen any dissent since Richmond Fed President Jeffrey Lacker almost exactly a year ago. Mr. Hoenig was also the Lone Dissenter twice in 2001 and once in 1995, always in the hawkish direction (preferring either no cut or a smaller one than the rest of the committee).
With today’s move, Mr. Hoenig tied the record for dissents among current FOMC members, according to a tally by Wrightson ICAP. Both Mr. Lacker and Dallas Fed President Richard Fisher have five dissents each.
It may be a sign of more debate to come this year on the FOMC, which already had been pondering when it should change the “extended period” language. Mr. Hoenig, long known as one of the committee’s most hawkish members, made his position rather clear in his latest public comments.
“Maintaining excessively low interest rates for a lengthy period runs the risk of creating new kinds of asset misallocations, more volatile and higher long-run inflation, and more unemployment–not today, perhaps, but in the medium and longer run,” he said earlier this month. “Maintaining short-term interest rates near zero could actually impede the recovery process in financial markets.”
Welcome back, Mr. Hoenig.
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I know I have written mostly negative posts (cough, about Bernanke!). So let me be positive about Mr. Hoenig (thank God) for a change. LISTEN TO THIS MAN PLEASE. This guy is right - his logic is sound and his experience is extensive. WE DONT NEED ANY MORE BAD CAPITAL ALLOCATION. Get rid of this WE ARE GAURANTEEING ZERO RATES FOREVER committment. Please.
ABC News Story that finally led Toyota and Lexus to acknowledge problems with their cars and stop selling popular models ___________________
Owners of Toyota Cars in Rebellion Over Series of Accidents Caused by Sudden Acceleration
Refusing to accept the explanation of Toyota and the federal government, hundreds Toyota owners are in rebellion after a series of accidents caused by what they call “runaway cars.” Safety analysts found an estimated 2000 cases in which owners of Toyota cars including Camry, Prius and Lexus, reported that their cars surged without warning up to speeds of 100 miles per hour.
http://abcnews.go.com/Blotter/RunawayToyotas/sudden-acceleration-toyota-cars-owners-rebel-accidents/story?id=8980479
Real Time Economics offers exclusive news, analysis and commentary on the economy, Federal Reserve policy and economics. The Wall Street Journal's Phil Izzo and Sudeep Reddy are the lead writers, with contributions from other Journal reporters and editors. Send news items, comments and questions to realtimeeconomics@wsj.com. Read more Economics coverage.
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