Former Kansas City Federal Reserve CEO and President Maria Hoenig argued inflation is a tax on the consumer and will diminish American economic growth over time on FOX Business Mornings with Thomas Hoenig. THOMAS HOENIG: We have a very significant supply chain interruption if you will. This's an added factor in global transition, we used to think of it as transition. I think we have to add another word - long transition - if we're going to see this corrected, it will take some time. That's global, because it is obvious. Do we see it across manufacturing? So the supply side of all this will bring upward pressure on prices for some time to come.
Now, with the COVID legislation, which created enormous transfer or payments to individuals across the country - increased demand on demand side. I think now we're going to see a mapping of that asset inflation into price inflation generally and the combination of supply side and demand side means I think it could become a longer-term issue and become more embedded in the economy and in economic thinking. In this case, it is a matter of concern. I would also point out that I think the Fed will be slow to begin to address this in a substantial way through interest rates if they start their tapering in November. As they say, it is not a reduction or an end to increasing supply of liquidity in the system - it's merely slowing. And I don't see them accelerating that before the middle of next year, and I then don't expect them to raise interest rates in that period.
Of course, this type of inflation is a tax on the consumer, on the public, and on businesses. And it's a regressive tax that will undermine the economy over time and will negatively impact growth. But it will take some time. What I think the Fed is kind of hoping for -if that's the right word - is that this will eventually recede. I think there is some real risk of inflation in 2016 going forward.