Lockhart: End to Fed MBS Purchases Should Be Calm
The end of the Federal Reserve’s mortgage buying program should be cool as private markets are poised to fill the void, Federal Reserve Bank of Atlanta President Dennis Lockhart said Wednesday.
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| Lockhart |
The Fed’s $1.25 trillion mortgage buying program, which it kicked off during the worst of the credit crisis to help markets and the economy, finished Wednesday, and the mortgage market was under a bit of pressure. Lockhart said that mortgage rates should continue to wait attractive to homebuyers at around or a small above 5%, which has been historically attractive.
“The stopping of our buys should have a relatively light effect,” Lockhart said, and rates should stay in house and “should continue to help stabilize the housing sector. The effect on the housing sector should not be adverse.”
Lockhart, currently a non-voting member of the interest rate-setting Federal Open Market Committee, made the remarks in answers to consultation questions following prepared remarks he delivered at a business leaders luncheon here.
In other comments, Lockhart said that he is confident that when the time is right, the Fed will be able to effectively drain reserves from the system and shrink its balance sheet.
In his prepared remarks, the central merchant banker pointed to employment as a “daunting economic challenge.” He prominent that there are signs the worst has past and labor markets are headed in the right direction. But he acknowledged these markets wait weak, and said the recovery still has a long ways to go.
Lockhart said monetary plot remains accommodative, but added that it is doable interest rates will need to be tightened before the jobless rate has found a satisfactory level.