New York Fed’s Williams Says Treasury and Mortgage Purchases Support Housing Market

The Federal Reserve Building is pictured in Washington, USA, March 19, 2019. REUTERS / Leah Millis / File Photo

July 12 (Reuters) – The Federal Reserve’s purchases of Treasury securities and mortgage-backed securities affect both interest rates and financial conditions in general and one group does not impact significantly more important in the housing market, New York Fed Chairman John Williams said on Monday.

“I don’t see them as one tool particularly focused on housing and the other not,” Williams told reporters after speaking virtually at an event hosted by the Bank of Israel. “Both affect interest rates, so both affect the cost of housing.”

Policymakers are discussing how and when to start slowing the Fed’s asset purchases from the current pace of $ 80 billion per month in Treasuries and $ 40 billion per month in bank-backed securities. mortgage claims.

Williams, repeating comments he made earlier, said the US economy had yet to meet the “substantial further progress” threshold set by authorities to reduce central bank asset purchases. He declined to provide a timeline for when he thinks the economy could reach that point.

When the time comes, Williams said it would be “natural” for the Fed to finish cutting back on asset purchases before adjusting interest rates, just as it has done in the past. But he said it’s important for the Fed to have flexibility.

The minutes of the Fed’s policy-setting meeting in June show officials are divided over the best approach to reducing asset purchases, with some Fed officials supporting a reduction in asset purchases. mortgage loans faster than Treasury purchases for fear of an overheating housing market.

Williams said Monday that although house prices have risen, he does not think they are in “bubble” territory, indicating lower levels of consumer debt and a stronger financial system.

The New York Fed chief also said that establishing a permanent pension facility that companies could tap into as needed to borrow money could help the Federal Reserve keep tighter control over rates. short-term interest in the event of an unexpected disruption in the short-term funding markets,

“My experience of 2019 and 2020, if anything tells you that the unexpected happens and you need to prepare for it,” Williams told reporters. Fed officials discussed the design of a possible permanent pension facility at the June meeting, but have yet to decide whether they will create such a program. Read more

Report by Jonnelle Marte; Editing by Chizu Nomiyama

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