The housing market is adding fuel to the economy, but high unemployment levels necessitate the Federal Reserve's ongoing committment to highly accommodative monetary policy, Federal Reserve Chairman Ben Bernanke said in his semi-annual monetary policy report to Congress.
The chairman said inflation is still below long-run objectives and unemployment remains too high, making the Fed’s current monetary intervention "appropriate for the foreseeable future."
These words come after a volatile few weeks in the mortgage market – a period sparked by concerns that the Federal Reserve Chairman foresaw an end to the Fed’s mortgage-backed securities purchases in the near future.
Bernanke’s speech Wednesday, indicated that the Fed chairman is pleased with the results of the central bank acquiring billions in mortgage-backed securities each month – a strategy that has been added to the already near zero federal funds rate.
"Housing has contributed significantly to recent gains in economic activity," Bernanke noted.
"Home sales, house prices, and residential construction have moved up over the past year, supported by low mortgage rates and improved confidence in both the housing market and the economy," the chairman added.
"Rising housing construction and home sales are adding to job growth, and substantial increases in home prices are bolstering household finances and consumer spending while reducing the number of homeowners with underwater mortgages."
Bernanke recognizes rising interest rates as an ongoing concern for the market and said the Fed will continue to monitor the situation carefully.
HousingWire Investments Reporter Christina Mlynski will have more coverage of Bernanke's testimony in front of Congress later this morning.