September 24, 2009
The U.S. Federal Reserve on Wednesday decided to slow down the pace of a program designed to aid housing purchases amid signs that the battered housing market is stabilizing.
"To provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of 1.25 trillion U.S. dollars of agency mortgage-backed securities and up to 200 billion dollars of agency debt," the Federal Open Market Committee said in a statement after wrapping up a two-day meeting.
"The Committee will gradually slow the pace of these purchases in order to promote a smooth transition in markets and anticipates that they will be executed by the end of the first quarter of 2010," it said.
The Federal Reserve announced the program to buy mortgages and debts from Fannie Mae, Freddie Mac and Ginnie Mae last November, shortly after the financial crisis culminated with the collapses of the Lehman Brothers.
The program, designed to prevent a complete breakdown of the housing market, was originally scheduled to end by the end of this year.
Observers believe that the Fed decision to stretch out the goal of purchasing 1.45 trillion in mortgage-backed securities and debts issued by companies like Fannie Mae and Freddie Mac shows that the U.S. central bank is confident the nascent recovery will take hold.
The Federal Reserve has so far bought about 775 billion dollars worth of mortgage-backed securities and debts from the major loan providers for home buyers.
Nurturing the current economic recovery, the Federal Reserve also decided on Wednesday to leave the federal funds rate at 0 to 0.25 percent and indicated that it will leave the benchmark interest rate at exceptional low levels "for an extended period" of time.