Fed wants QE to continue past March 2010 cutoff
Federal Reserve Bank of St. Louis President James Bullard wants the Federal Reserve to continue to buy mortgage-backed securities beyond the current end-March 2010 cut-off date to give policy makers more flexibility as they seek to shepherd the economy toward recovery.
“I have advocated to keep the asset purchase program open but at a very low level, and wait and see what happens, and as information comes in about the economy we can adjust that program while the federal funds rate remains at zero,” Bullard told Dow Jones Newswires in an interview Sunday ahead of a conference in New York. He added “no decision has been made” about the program’s fate.
Bullard will be a voting member on the interest rate setting Federal Open Market Committee in 2010. In its statement after the November FOMC meeting, the central bank reiterated that it will continue to monitor its asset buying programs “in light of the evolving economic outlook and conditions in financial markets.”
The Fed’s $1.25 trillion mortgage bond purchase program is aimed at keeping borrowing costs low for home owners as a way to support the housing market and the broader economy. As of Nov. 19, the Fed held roughly $847 billion in mortgage-backed securities on its balance sheet. The Fed is also committed to buying $175 billion in debt issued by the government backed housing lenders Fannie Mae, Freddie Mac and Ginnie Mae. But the programs are controversial because they have led, together with other efforts to support financial markets, to a surge in the Fed’s balance sheet to $2 trillion from around $800 billion before the crisis.
Translation: Buy more gold.
