Fed’s Brainard Says Central Bank Purchase Of Mortgage Loans Is Part Of Broader Efforts To Lower Rates

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PHOTO: Head of the Federal Reserve Board Lael Brainard speaking at the School of Government. John F. Kennedy at Harvard University in Cambridge, Massachusetts, USA, March 1, 2017 REUTERS / Brian Snyder

(Reuters) – The Fed’s purchase of mortgage-backed securities is having the same impact on long-term rate cuts as buying Treasuries and is part of a broader effort to bolster the economy, Fed Chief Lael Brainard said Tuesday.

“From a monetary policy perspective, the effect of buying Treasuries and MBS is broadly the same,” Brainard said during a virtual call hosted by the New York City Economic Club.

When asked whether the central bank should buy mortgage bonds when the housing market is performing well, Brainard said the current monthly rate of buying $ 80 billion in Treasury securities and $ 40 billion in mortgage-backed securities is an “efficient” way. contain rates and provide markets with confidence.

“The roster was chosen to provide confidence in the markets,” Brainard said. “It’s effective in the current composition, and this is the lens through which we continue.”

The Fed official’s remarks could be a sign that it may not support a cut in central bank purchases of mortgage-backed securities at a faster pace than Treasuries when the time comes to start cutting those asset purchases, said Michael Feroli, chief economist at JPMorgan. in USA. …

“It sounded like she just didn’t see much benefit from the first move from MBS in terms of what it really does for the housing market,” said Feroli, who moderated the conversation with Brainard.

Brainard said the Fed should remain “firm” in its support as the economy resumes and works through temporary supply-demand mismatches.

Reporting by Jonnel Marthe in New York; Additional report by Ann Sapphire; Edited by Andrea Ricci and Cynthia Osterman

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