Wednesday, January 6, 2010

More US Quantative Easing?

A report out from Reuters indicates that the US Federal Reserve is discussing re-entering the mortgage-backed securities market later this year if its buying power is needed to hold down interest rates.

The Federal Reserve is supposed to end its $1.25 trillion agency MBS purchasing program at the end of the first quarter of 2010.

Fed officials, however, "are prepared to contemplate changes if need be, depending on conditions in the economy, housing finance and in financial markets more broadly," according to a Market News story written by Steven Beckner.

"Among the options that has been discussed, say people in a position to know, is doing additional MBS purchases."

When the Fed stops buying at the end of the first quarter, rates in the market are widely expected to rise, pulling mortgage rates higher as well.

The question becomes... how long before confidence in the US dollar is lost when the massive debt is expanded at the same pace as last year?


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