Real rates near zero warrant modest tightening to restore 2% inflation, Hoenig says

Thomas Hoenig said inflation-adjusted interest rates remain close to zero, arguing that modest monetary tightening and gradual policy normalization are needed to bring inflation back to 2%. With inflation near 4%, Hoenig said monetary policy remains accommodative despite nominal borrowing costs. Returning inflation to target requires a moderately restrictive stance, he argued. In an October 28 interview with David Lin, Hoenig, a senior fellow at the Mercatus Center and former president of the Kansas City Fed, pointed to a short-term policy rate target of 3.5–4% against inflation of about 4%.

Source: TokenPost