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Williams Says Fed’s Treasury Purchases Boost Housing Market, Too

EconomyJul 12, 2021 16:58
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2/2 © Bloomberg. John Williams, president of the Federal Reserve Bank of San Francisco, listens during a Hutchins Center on Fiscal and Monetary Policy panel discussion at the Brookings Institution in Washington, D.C., U.S., on Monday, Jan. 8, 2018. The event was entitled Should the Fed Stick with the 2 Percent Inflation Target or Rethink It. Photographer: Andrew Harrer/Bloomberg 2/2

(Bloomberg) -- The U.S. central bank’s purchases of Treasury and mortgage-backed securities are both contributing to lower housing costs, Federal Reserve Bank of New York President John Williams said, alluding to an ongoing debate among policy makers over whether or not to scale back MBS buying faster than Treasuries when the time comes to taper.

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

The Fed is currently buying $120 billion of Treasuries and mortgage-backed securities each month, and Fed officials are planning to discuss in upcoming policy meetings the timing and mix of reductions in the pace of purchases as the economy recovers from the pandemic.

Minutes of the June 15-16 meeting of the central bank’s rate-setting Federal Open Market Committee, on which Williams serves as vice chair, revealed a debate over the merits of tapering purchases of the two types of bonds at different rates.

“Several participants saw benefits to reducing the pace of these purchases more quickly or earlier than Treasury purchases in light of valuation pressures in housing markets,” according to the record of the gathering, which the Fed published on July 7.

“Several other participants, however, commented that reducing the pace of Treasury and MBS purchases commensurately was preferable because this approach would be well aligned with the Committee’s previous communications or because purchases of Treasury securities and MBS both provide accommodation through their influence on broader financial conditions,” the minutes said.

©2021 Bloomberg L.P.

Williams Says Fed’s Treasury Purchases Boost Housing Market, Too
 

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