Fed’s Hoenig says US economy in recovery

A US Federal Reserve official said that while the US economy is clearly rebounding, it is too soon to begin to withdraw the Federal Reserve’s massive support.

“I see nothing that conflicts with the widely held opinion that we are in recovery,” Kansas City Fed President Thomas Hoenig said in remarks prepared for delivery to an economic conference. “I would not support a tight monetary policy in the current environment,” Hoenig said.

However, he warned that it will be important for the Fed to pull back from its ultra-low interest rates and vast amounts of cash put into the financial system before igniting inflation.

“My experience tells me that we will need to remove our very accommodative policy sooner rather than later.”

The Fed has cut rates to near zero and more than doubled its balance sheet as it has sought to pull the United States out of its worst financial crisis since the Great Depression. The Fed noted in September that the economy may be picking up after a long contraction, but recent evidence of lingering weakness in the labour market raised questions about the pace of the recovery.

Hoenig said government spending and tax relief programs should complement the Fed’s efforts and prevent the economy from backsliding.

“A vast amount of stimulus has been put in place to spark this recovery, and I believe it will prevent a double-dip recession.”

Hoenig urged the US Congress to quickly put in place a system of winding down failing major financial institutions.