Fed's credibility problem hurting the Fed, former official says

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Fed's credibility problem hurting the Fed, former official says

The former FDIC Vice Chairman Thomas Hoenig joined Mornings with Maria on Thurdsay morning to talk about the January Federal Reserve meeting and rate hike. Hoenig claimed that the Federal ReserveFederal Reserve and Jerome Powell's handling of the economy has resulted in a credibility problem.

The market is saying the Fed is done, so inflation is coming down, and now they're going to think about lowering rates by the end of the year. The Fed is saying, no, we're just getting started, and we want to make sure you understand that we're just getting started, and so we're going to keep rates up, and the discussions inside the Fed will be how long do we keep rates elevated? The market has led the Fed for over a decade and a half. The market is pushing the market to ease more quickly than they might otherwise. The credibility problem with the Fed is one of the things that the Fed has to deal with. They're going to have this difference going on through most of the year, and I think they're going to have to stick to their guns for a good part of this year.

I think part of the problem is that the Fed raised only a quarter point, only a quarter point, which confirms what the market is thinking. We're going to do this, and so the Fed has slowed down even more, and that signal is hurting the credibility of the Fed. We'll see. The market needs to be convinced that the Fed is in charge again, because they're talking tough, but words are not enough.