Fed Governors' Big Yaps
Posted: Thu Feb 18, 2010 10:36 am
Around 1:00 et yesterday, the Fed's Plosser suggested that the Fed should begin selling its MBS portfolio "sooner rather than later." He believes that Fed MBS purchases blur the line between monetary policy and fiscal policy, since keeping mortgage rates lower serves both purposes.
At 2:00 et yesterday, the Fed released the detailed minutes from the January 27 Fed meeting. The minutes revealed that "several" Fed officials favored starting the sale of the Fed's MBS portfolio "in the near future."
Investors were not expecting that Fed MBS sales would begin so soon, so MBS prices have been in a free fall since yesterday afternoon.
TRANSLATION: Higher- possibly dramatically higher- mortgage rates at a time when the housing sector can least afford it, and bad news for the administration as this will certainly dampen whatever prospects for the housing recovery they were counting on as affordability will be adversely affected for first time homebuyers.
Combine this with the sunsetting of the first time homebuyer tax credit in June and this spells BAD news for the housing sector, the economy in general, and politicians running for re-election come fall.
At 2:00 et yesterday, the Fed released the detailed minutes from the January 27 Fed meeting. The minutes revealed that "several" Fed officials favored starting the sale of the Fed's MBS portfolio "in the near future."
Investors were not expecting that Fed MBS sales would begin so soon, so MBS prices have been in a free fall since yesterday afternoon.
TRANSLATION: Higher- possibly dramatically higher- mortgage rates at a time when the housing sector can least afford it, and bad news for the administration as this will certainly dampen whatever prospects for the housing recovery they were counting on as affordability will be adversely affected for first time homebuyers.
Combine this with the sunsetting of the first time homebuyer tax credit in June and this spells BAD news for the housing sector, the economy in general, and politicians running for re-election come fall.
