A Back-Firing Fed Policy?

This blog covered in a post last month the fact that the Fed has indicated a commitment to keeping long-term interest rates in the housing market low. In fact, as we also reported, the Fed rate hike was unlikely to affect long-term, fixed-rate mortgages. However, markets are complicated, and the Fed has more than one lever. As a result of its QE program, the Fed now owns $1.7 trillion in mortgage backed securities. And they’re not selling. Which is causing banks to get out of the business  Which will reduce liquidity, and may cause interest rates to rise.

 

Backfire

Leave a Reply

Your email address will not be published. Required fields are marked *