Fed Won’t Purchase Full $200bn Agency Debt, FOMC Says

The Federal Reserve’s Federal Open Market Committee (FOMC) said it won’t purchase as much agency debt as it previously announced.

The $175bn of agency debt purchases is less than the previously announced $200bn, but the FOMC said the amount “is consistent with the recent path of purchases and reflects the limited availability of agency debt.”

The Fed will continue its planned purchase of $1.25trn of agency mortgage-backed securitizaties (MBS) from Fannie Mae (FNM: 1.02 -0.97%) and Freddie Mac (FRE: 1.14 -1.72%). In a statement released Wednesday from its September meeting, the FOMC said the purchases of both agency debt and MBS will gradually wind down by the end of Q110.

The committee agreed to maintain the target range for the federal funds rate at 0 to 0.25% and said economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations will keep the rates low for an extended period.

The committee noted that economic activity continues to pick up, including activity in the housing sector, while the conditions in financial markets remain roughly unchanged, on balance, from its previous meeting. Household spending also appears to be expanding, but is restricted by ongoing job losses, sluggish income growth, lower housing wealth, and tight credit, the committee added.

Write to Austin Kilgore.