WASHINGTON — Federal Reserve officials were divided over when the Fed should start shedding some of its vast portfolio of mortgage securities. The tricky endeavor would move the central bank closer to tightening credit for millions of Americans.
Minutes of the Fed’s closed-door meeting April 27-28, released today, showed Fed officials expressed wide-ranging views about when and how the Fed should go about selling some of the $1.25 trillion of mortgage securities bought during the financial and economic crises. The assets were purchased to drive down mortgage rates and aid the housing market.
Its challenge is to sell those assets in a way that doesn’t weaken home prices and jack up mortgage rates.
Most Fed officials expressed a preference for strategies that would “eventually” lead to the sale of mortgage securities in an effort to shrink the Fed’s $2.3 trillion balance sheet back to a more normal size. And, they thought that any move to sell the assets should be communicated in advance. But they differed on the timing and the details of how to do this.
Most Fed officials favored “deferring asset sales for some time.” A majority preferred beginning sales some time after the Fed’s first increase in its key short-term bank lending rate. Such an approach would postpone any asset sales until the economic recovery was firmly entrenched.
Others favored an approach in which the Fed would “soon” announce a general schedule for selling assets in the future. The start date wouldn’t necessarily be linked to the timing of the Fed’s first rate increase.
A few wanted to start selling the mortgage securities “relatively soon.”
Separately, some officials worried the European debt crisis could shake Wall Street and possibly slow the U.S. recovery.
Talk to us
> Give us your news tips.
> Send us a letter to the editor.
> More Herald contact information.
