Ending the Federal Reserve's mortgage-buying program could cause home-loan rates to increase by as much as three-quarters of a percentage point, Boston Fed President Eric Rosengren told The Hartford Courant Friday.
‘Actually, I've been surprised that we haven't seen more of a backing up already,’ Rosengren told the paper. ‘You maybe would have thought you would have seen rates move up more quickly than they have, but nonetheless, that is a concern.’
The Fed is scheduled to retire its $1.25 trillion mortgage-backed securities purchase program at the end of March.
Described by the Courant as an "inflation dove," Rosengren also commented that the target federal funds rate will remain low in the near term, commensurate with the low threat of inflation (about 1.5%).
‘Until inflation gets back to two percent, there is plenty of room to wait and see how the economy progresses,’ the Boston Fed chief said. ‘We want a trajectory that gets us back to full employment and gets us back to two percent.’
SOURCE: The Hartford Courant