ALG Editor’s Note: In the following featured excerpt from the minutes of the Federal Open Market Committee Meeting of November 3rd, Kansas City Fed President Thomas Hoenig dissented from the Fed’s decision to purchase $600 billion of U.S. treasuries:
Kansas City Fed Chief Hoenig Dissents to $600 Billion Treasuries Purchase
Mr. Hoenig dissented because he judged that additional accommodation would do little to accelerate the economy’s continuing, gradual recovery. In his assessment, the risks of additional purchases of Treasury securities outweighed the benefits. Mr. Hoenig believed that additional purchases would risk a further misallocation of resources and future financial imbalances that could destabilize the economy. He also saw a potential for additional purchases to undermine the Federal Reserve’s independence and cause long-term inflation expectations to rise. Mr. Hoenig also believed it was not appropriate to indicate that economic and financial conditions were “likely to warrant exceptionally low levels of the federal funds rate for an extended period” or to reinvest principal payments from agency debt and mortgage-backed securities in long-term Treasury securities. In his assessment, this continued high level of monetary policy accommodation could put at risk the achievement of the Committee’s long-run policy objectives.
