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The Federal Reserve offered more encouragement for the economy on Thursday by announcing that it is slowing a program to purchase more than $1 trillion in mortgage-backed securities.
The Fed noted that it plans to complete its purchase of $1.25 trillion in agency mortgage-backed securities by the end of the first quarter of 2010. The initial plan had called for these purchases to be completed by the end of the current year.
"Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit," said a Federal Reserve announcement.
As the economy continues to improve, the Fed also indicated that it expects inflation to "remain subdued for some time" because of current conditions.
The purpose of the plan to purchase the mortgage-backed securities was to lower rates for borrowers. However, this may be having the desired effect already, with the Mortgage Bankers Association announcing Wednesday that mortgage applications had risen to their highest point since May.
By Steve Monfort
Federal Reserve slowing pace of mortgage securities program
The Federal Reserve offered more encouragement for the economy on Thursday by announcing that it is slowing a program to purchase more than $1 trillion in mortgage-backed securities. The Fed noted that it plans to complete its purchase of $1.25 trillion in agency mortgage-backed securities by the end of the first quarter of 2010. The initial plan had called for these purchases to be completed by the end of the current year.
"Conditions in financial markets have improved further, and activity in the housing sector has increased. Household spending seems to be stabilizing, but remains constrained by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit," said a Federal Reserve announcement.
As the economy continues to improve, the Fed also indicated that it expects inflation to "remain subdued for some time" because of current conditions.
The purpose of the plan to purchase the mortgage-backed securities was to lower rates for borrowers. However, this may be having the desired effect already, with the Mortgage Bankers Association announcing Wednesday that mortgage applications had risen to their highest point since May.
By Steve Monfort
