Fed Reserve to increase mortgage-backed securities by $40 billion per month

The Federal Open Market Committee (FOMC) announced today that they had approved an additional $40 billion per month in mortgage-backed securities as well as "undertake additional asset purchases, and employ its other policy tools as appropriate" in order to support maximum employment and price stability in the economy. The press release also announced that the federal funds rate will remain at 0 - 1/4 percent and that the low rate levels are likely to remain in place through 2015.

The Fed press release notes that while growth in employment has been show, household spending has continued to advance. Two key points in the release also point out that housing has shown signs of improvement and that inflation has been subdued.

The combined series of actions by the Federal Reserve will increase the FOMC's holdings of long-term securities by $85 billion each month through 2012 which should put downward pressure on long-term interest rates while also supporting mortgage markets. The current series of actions is designed to demonstrate an "accomodative" stance by the FOMC.

Click here to read the entire FOMC press release from the Federal Reserve.

Written and Published by: VanEd

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