Is the Federal Reserve's quantitative easing over inflating housing prices? According to one Fed Official they aren't Yet the Federal Reserve is buying 50% of mortgage backed securities, keeping mortgage interest rates at record lows and affecting pricing on mortgage backed securities themselves.
The Federal Reserve FOMC released their updated economic projections and frankly they are weird. GDP estimates were lowered yet the official unemployment rate projections were also lowered. The rule of economic law is lower economic growth means less jobs and hires so how one can have subdued GDP with better unemployment figures is none too clear.
QE3 has been predicted by many as the next round of quantitative easing. The Federal Reserve's latest FOMC meeting minutes suggest no more quantitative easing, beyond the competition of QE2, according to Bloomberg:
Federal Reserve officials signaled they’re unlikely to expand a $600-billion bond purchase plan as the recovery picks up steam and the threat that inflation will fall too low begins to wane.
The economy is on a “firmer footing, and overall conditions in the labor market appear to be improving gradually,” the Federal Open Market Committee said in a statement yesterday after a one-day meeting in Washington. While commodity prices have “risen significantly,” inflation expectations have “remained stable.”
Information received since the Federal Open Market Committee met in January suggests that the economic recovery is on a firmer footing, and overall conditions in the labor market appear to be improving gradually. Household spending and business investment in equipment and software continue to expand. However, investment in nonresidential structures is still weak, and the housing sector continues to be depressed. Commodity prices have risen significantly since the summer, and concerns about global supplies of crude oil have contributed to a sharp run-up in oil prices in recent weeks. Nonetheless, longer-term inflation expectations have remained stable, and measures of underlying inflation have been subdued.
The Federal Reserve has a dissident in their midst who is about to get FOMC voting rights. Philadelphia Federal Reserve President Charles I. Plosser gave one wallop of a speech making it very clear he disagrees with the Federal Reserve bailing out the Banksters and the Housing Market. He also disagrees with intervention in assets as well as giving the illusion the Federal Reserve can really do something about unemployment. From the speech:
I have suggested that the System Open Market Account (SOMA) portfolio, which is used to implement monetary policy in the U.S., be restricted to short-term U.S. government securities. Before the financial crisis, U.S. Treasury securities constituted 91 percent of the Fed’s balance-sheet assets. Given that the Fed now holds some $1.1 trillion in agency mortgage-backed securities (MBS) and agency debt securities intended to support the housing sector, that number is 42 percent today. The sheer magnitude of the mortgage-related securities demonstrates the degree to which monetary policy has engaged in supporting a particular sector of the economy through its allocation of credit. It also points to the potential challenges the Fed faces as we remove our direct support of the housing sector.
Philadelphia Federal Reserve President Charles I. Plosser gave one wallop of a speech making it very clear he disagrees with the Federal Reserve bailing out the Banksters and the Housing Market. He also disagrees with intervention in assets as well as giving the illusion the Federal Reserve can really do something about unemployment. From
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