Hoenig warned in April that the Fed risks inflating new asset bubbles and causing other economic distortions by keeping short-term rates at their current range of 0 to 0.25%. The Fed cut the fed funds target to its current level in December 2008 as the economy went into free fall following the collapse of Lehman Brothers. Now, after 18 months of free money and several months of economic recovery, Hoenig says the time has come for the Fed to act. He sees a two-stage process in which the Fed would first eliminate its commitment to maintain "exceptionally low levels" of the fed funds rate for an extensive period.

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