Hoenig pushing for increase in interest rates

The FOMC also agreed to keep the central bank's balance sheet around $2 trillion, using maturing mortgage-backed securities to buy government debt and force down already record-low mortgage and business debt rates, another decision with which Hoenig disagreed.

High interest rates did not cause the financial crisis or the recession — in fact it was low rates that created "excessive debt and leverage among consumers, businesses and government," that did, he said. 

Hoenig is advocating a policy that accommodates the recovery "but slowly firms as the economy itself expands and moves toward more balance." 

"I advocate dropping the "extended period" language from the FOMC’s statement and removing its guarantee of low rates. This tells the market that it must again accept risks and lend if it wishes to earn a return."

Despite mixed monthly data, economic indicators have been "consistently positive" and, overall, the nation is "experiencing a better pace of recovery this time than at this point in our previous two economic recoveries," he said. 

"Profits are improving and corporate balance sheets for the nonfinancial sector are strengthening and are increasingly able to support investment growth as confidence in the economy rebuilds," he said.

"Also, although credit supply and demand may be an issue impeding the recovery to some extent, a shortage of monetary stimulus is not the issue."

Hoenig also disagreed with colleagues that deflation, a prolonged period of price declines, could hinder the recovery. 

Concerns about deflation were expected to ease after the consumer price index released today showed a 0.3 percent increase in July. 

He said the consumer price index hasn’t declined "systematically" in more than 50 years.

"I find no evidence that deflation is the most serious threat to the recovery today."