The majority of the Fed’s voting members on the Federal Open Market Committee noted signs of improvement in the housing sector at September’s meeting, according to FOMC meeting minutes released Thursday.
“Housing market conditions continued to improve, but construction activity was still at a low level, reflecting the restraint imposed by the substantial inventory of foreclosed and distressed properties and by tight credit standards for mortgage loans,” the FOMC meeting minutes read.
FOMC members noted single-family home starts fell in July while housing permits grew. Higher permit activity could mean “further gains in single-family construction in the coming months,” the FOMC members concluded.
When the Fed announced it would take another stab at monetary accommodation by acquiring Treasurys and mortgage-backed securities, critics attacked the move as potentially inflationary and possibly too aggressive to carve back without creating other negative effects in the economy.
Fed minutes from the latest FOMC meeting show the majority of the voting members confident the central bank can carve back excessive monetary policy before it moves too far in the other direction and causes issues in the broader economy.
“[S]ignificant additional asset purchases should not adversely affect the ability of the committee to tighten the stance of policy when doing so becomes appropriate,” the FOMC meeting minutes said. “In their discussion of the staff presentation, a few participants (voting FOMC members) noted the uncertainty surrounding estimates of the effects of large-scale asset purchases or the need for additional work regarding the implication of such purchases for the normalization of policy.”
Still, the Fed minutes show a majority of the voting members convinced another round of asset purchases could prove beneficial to the overall economy and that the Fed has the tools necessary to deal with its balance sheet and risks from QE3.
