Fed Slows Housing Market Plan; Rates to Stay Low


Signaling confidence in a recovery, the Federal Reserve decided Wednesday to stretch out the pace of a program intended to lower mortgage rates and prop up the housing market.

Even so, rates on home loans are expected to remain low.

To foster the recovery, the Fed also decided to hold the target range for its key bank lending rate at a record low of between zero and 0.25 percent.

Stocks fell as a brief rally followed the Fed's statement and then faded. The Dow Jones industrial average came within 82 points of crossing 10,000 for the first time since October but ended with a loss of 81.

Stocks often trade erratically on days when the Fed issues policy decisions as investors pore over the statement. Some analysts said the Fed's statement was anticipated and didn't give the market enough reason to go higher — especially with stock indicators up more than 50 percent from their March lows."The market got exactly what it was expecting," said Thomas Wilson, a managing director at Brinker Capital in Berwyn, Pa.

Wilson cautioned, though: "I think there is a real concern out there that this is just a head fake and the stimulus out there is temporary," pointing to the Fed's slowing of its purchases of mortgage-backed securities.

With the economy on the mend, the Fed said it now plans to reach its goal of buying $1.45 trillion in mortgage-backed securities and debt by the end of March, rather than by the end of this year as originally scheduled. It's the second time since August that the Fed has opted to slow emergency programs designed to encourage spending and boost the economy.

Those decisions show Fed Chairman Ben Bernanke and his colleagues are shifting from managing the financial and economic crises to nurturing a budding recovery.

In a far brighter assessment, Fed policymakers said: "Economic activity has picked up following its severe downturn." In August, policymakers had said economic activity was "leveling out."

0 comments:

Post a Comment