Fed steady in commitment to buy agency MBS
The Federal Open Market Committee said the Fed plans to continue purchasing additional agency mortgage-backed securities to foster a nascent housing recovering while simultaneously combating elevated unemployment levels.
The FOMC made that statement after members met this week and concluded the Fed would continue acquiring agency MBS at a pace of $40 billion per month and longer-term Treasury securities at a pace of $45 billion a month.
"The committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction," the FOMC said in a statement. "Taken together, these actions should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative."
The move was in line with market analysts who predicted more MBS acquisitions to keep the consistent, but tepid, housing recovery afloat.
"Prematurely withdrawing from the MBS markets could threaten to derail nascent progress in the broader goals of refinancing high risk borrowers, normalizing the mortgage banking industry and ensuring a sustained recovery in home prices," analysts with Bank of America Merrill Lynch wrote in a report this week.