MNI) Washington – (Repeats story first published on February 27)

Former Kansas City Fed President Thomas Hoenig told MNI the U.S. central bank might need to raise interest rates more than investors expect because demand remains strong and monetary policy is still loose compared with the rate of inflation.

The FOMC will hike rates at least twice more in quarter-point increments, but might need to go even further if the data do not cooperate — particularly on employment, Hoenig said.

“If they get strong jobs numbers continually then they probably will have to push rates higher than people had anticipated and increase the risk of a downturn,” he said. “Now that the market is more convinced that inflation is more embedded than even it thought, the Fed is going to have to be determined if they’re going to hold on to their credibility.”

Employment and inflation data over the past month prompted investors to price in a higher peak fed funds rate around 5.3%. The economy generated more than half a million jobs in January while the latest readings on both CPI and PCE pointed to underlying strength in inflation.

“The job numbers left them wondering whether inflation is going to come down as quickly as they had hoped.”