08 Jan 10 Will the Fed Let the Mortgage Market Walk?
Besides conventional and FHA mortgage rates, there are other impediments to a fresh round of mortgage-backed debt purchases, including the Fed’s desire to keep inflation expectations under control. One of the reasons the Fed capped its bond-buying program, which included more than $1.4 trillion in mortgage-related securities and $300 billion in Treasury debt, was the perception that the central bank was “monetizing” federal deficits printing money to keep the government solvent. This latent fear, prevalent in financial markets and reflected in the elevated price of gold, has the potential to turn more than $1 trillion in dormant excess bank reserves into a runaway rise in prices, analysts say.
Barring a double-dip in housing, however, Fed officials are unlikely to meddle. Their reluctance to intervene anew has many roots. For one thing, it would signal a policy about-face that could adversely affect markets as investors reassess what they believed was an improving economic outlook. > Read the original article online.
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