FED Will Buy More Than Half of All Agency MBS until Labor Markets Improve

Date Published 9/17/2012
Author Marja Hoek-Smit
Country United States

The Federal Open Market Committee (FOMC) of the US Federal Reserve system decided on an aggressive increase of Federal Reserve purchases of agency mortgage-backed securities (MBS). It also extended its forward guidance on maintenance of the current low range of fed funds of 0% to 0.25% until mid-2015.

The FOMC agreed on an open-ended commitment to maintain the MBS purchases at $40 billion per month until there was a substantial improvement in labor markets. This commitment is over and above the current policy of reinvesting principal repayments of its existing MBS holdings.

This commitment may amount to the Fed buying more than half of all new agency MBS issued as the table by JP Morgan indicates.

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