Hoenig: Current Fed policy \'dangerous gamble\'
By Greg Robb

(MarketWatch)

In perhaps one of the sharpest critiques of Federal Reserve policy ever from a sitting policy member, Thomas Hoenig, the president of the Kansas City Federal Reserve Bank, said zero interest rates were a dangerous gamble in a period of moderate growth.

In a speech in Lincoln, Nebraska, Hoenig warned that Fed Chairman Ben Bernanke and his allies were trying to use monetary policy as a cure-all for every problem faced by the United States today. Keeping rates too low for too long will only lead to a repeat of the cycle of severe recession and unemployment in a few short years, he warned.

Hoenig has dissented at every Fed policy meeting this year. He wants the Fed to commit to a slow and gradual increase in the target Federal funds rate. Hoenig argued that the economic news was not as bad as reported in the media and described by Wall Street experts. The markets want zero rates to continue because they are earning guaranteed returns on free money, he said. Hoenig dismissed fears of deflation.