Members of the Federal Open Market Committee (FOMC) decided yesterday not to extend the Federal Reserve’s $1.25trn agency mortgage securities purchase program beyond March.
The Fed, at a recent average $10bn of Freddie Mac (FRE: 1.32 -1.49%), Fannie Mae (FNM: 1.1101 -0.88%) and Ginnie Mae mortgage-backed securities (MBS) purchased weekly, is on schedule to finish the program by the end of the month. The move comes at no surprise, with two weeks of reporting and $24bn of purchasing power left under the program.
Notes from the FOMC’s mid-December meeting indicated FOMC members considered extending and expanding government-led initiatives to buy MBS. An expansion of the program does not seem in the works, now that the FOMC decided to complete the purchases this month.
Developments since the FOMC’s January meeting, suggest economic activity continues to strengthen and the labor market is stabilizing, according to a statement released yesterday.
“While bank lending continues to contract, financial market conditions remain supportive of economic growth,” FOMC said.
The FOMC also decided yesterday to keep its target range for the federal funds rate at 0 to 0.25% “for an extended period.”
Federal Reserve Bank of Kansas City chief Thomas Hoenig once again cast the only vote against the policy action. The FOMC statement indicated that Hoenig believes keeping the federal funds rate “exceptionally low…for an extended period” is no longer necessary and could lead the the buildup of financial imbalances risks to long-term stability.
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