Former Kansas City Federal Reserve CEO and President Thomas Hoenig argued inflation is a tax on the consumer and that over time it will diminish American economic growth on FOX Business’ "Mornings with Maria."
THOMAS HOENIG: We have a very significant supply chain interruption, if you will. Globally, that's an added factor in what we used to think of 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 obvious because it is global. We see it in energy. We see it across manufacturing. So the supply side of all this is going to put upward pressure on prices for some time to come.
Now, with the 2020 and 2021 COVID legislation that created enormous transfer or payments to individuals across the country -- that has actually accelerated demand on the demand side. And I think now we're going to see a mapping of that asset inflation into price inflation generally and the combination of both the supply side and the demand side means I think it could become a longer-term issue and become more embedded in the economy and in economic thinking. So it is a matter of concern. I would also point out that I think the Fed will be slow to begin to address that in a significant way through interest rates if they start their tapering in November. As they say, that is not a reduction or an end of increasing supply of liquidity in the system -- it's merely a slowing. And I don't see them accelerating that before the middle of next year, and then I don't expect them to raise interest rates in that period.
Of course, this kind of inflation is a tax on the consumer, on the public, on businesses. And it's a regressive tax that will over time undermine the economy and undermine growth. But it will take some time. And I think what the Fed is kind of hoping for -- if that's the right word -- is that this will eventually recede. But I think it's going to be a while before it does. So I think there's some real risk for inflation going forward.
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