Fed's Hoenig Sees Economy Slowing at End of Year

by Patrick Lunsford, CollectionIndustry.com

The president of the Kansas City Federal Reserve, Thomas Hoenig, said in a speech yesterday that the U.S. economy is on track to slow in the final quarter of 2006 but that strong business investment should keep the slowing to a minimum.

Hoenig said, in advance of the release of official data, that economic growth most likely slowed to somewhere around 2% in Q3 on the downturn in the housing market.

Hoenig commented that while underlying inflation was a bit high, it is expected that the Fed’s diligent campaign of interest rate increases will catch up to inflation and it will begin to normalize.

On the U.S. consumer’s role in the economy, Hoenig said that Americans would need to learn to save more in order to counter a global economic trend of overconsumption in the United States and excess savings in much of Asia. Hoenig does expect economic growth to rebound to between 2.5 and 3% in 2007.