Fed Reaffirms Plan to Stop Buying MBS
Yes, the Federal Reserve Board said today that it will leave “for an extended period of time” interest rates at 0% to 0.25%.
But that wasn’t the news of note, to my mind. Rather, the important development was that the Federal Reserve confirmed in its FOMC note today that it will stop buying mortgage-backed securities, effectively ending its support of that market. The Fed said:
I’ve already written here about the ramifications of the Fed’s recusal from the MBS market here. Today’s full-steam-ahead notice sounds like the Fed is using its abandonment of the MBS market as a bone to throw at the inflation hawks. Whatever the underlying dynamics, the Fed’s retreat for the secondary mortgage market should be the headline of the day — and one that comes with many question marks for the capital markets.
