|
By Ronald Fink
While the Federal Reserve plans to wind down its special lending programs during the first half of this year, the central bank's purchases of mortgage-related debt may continue beyond then, according to an analysis published on Friday.
The Fed has stated it plans to unravel most of its emergency credit facilities, including those for commercial paper funding and overnight bank loans, by the end of February, and to cease supporting the mortgage market by the end of June.
But an analysis by research firm CreditSights suggests the bank's second goal may be elusive.
Mortgage-backed assets and debt issued by federal housing agencies still account for roughly 45 percent of the Fed's balance sheet. Meanwhile, Treasury securities, which once constituted almost all of the bank's assets, now represent roughly 35 percent, though that is up from 25 percent in early 2009.
The firm noted the Fed still plans to purchase even more MBS and agency debt, and that will bring these assets to a total of $1.25 trillion and $200 billion, respectively, once all scheduled transactions are completed.
In addition, CreditSights said it expected the Fed to continue to make such purchases unless the economic recovery can continue without additional fiscal stimulus.
"It is our view that while consumers will continue to drag on the economy we believe that central banks will continue to make liquidity available to support asset prices," the report said.
Although some members of the Federal Open Market Committee have recently expressed concern that continued credit market support by the Fed could fuel inflation, CreditSights said that the minutes of the most recent FOMC meeting indicated "there exists some support for increasing total asset purchases."
 |
in CFO Conversations by 
Subscribe to this comment's feed
