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Former Kansas City Federal Reserve Chairman Thomas Hoenig warned that inflation is “more than temporary” as Americans grapple with sky-high grocery and energy costs ahead of Thanksgiving. Hoenig appeared on “Morning with Maria” Tuesday to discuss how the Federal Reserve faces challenges in dealing with high consumer prices in the short- and long-term.

Thanksgiving dinner costs jump with inflation on the menu


Thomas Honig: I think the Fed needs to start recognizing the fact that it’s more than fleeting, of course, there are transitory elements in terms of logistics. But there is much more to it than in the context of the long history of monetary policy which has been very liberal. Long history of asset prices, not only bubbles, but property prices in general have been rising. This inflation is in a sense that the Fed needs to start looking at that. And then I think where the Fed is really being challenged is, with the amount of new spending since COVID, about six trillion, if I have the numbers right, for COVID relief, And on top of that, now we have the infrastructure law and we have the Build Back Better Bill which is under consideration. These will be major spending issues, and despite what they are believed to be, they will probably be much higher than anticipated, especially this Build Back Better. Depending on how they renew some of these programs, it could be twice as much as what is being reported… they haven’t actually raised taxes and [it’s] Perhaps a good thing, but it means that its financing will become even more dependent on the Fed’s willingness to buy securities. So the Fed is in a really tough position if the Fed tries to attack inflation. That’s all you have… the loan is being issued, they will be expected to buy it to keep interest rates low. This will only make the picture of long-term inflation more difficult.

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