A senior Federal Reserve official said on Sunday the central bank should keep alive a mortgage-backed securities buying program beyond a planned end-date to give policy-makers more flexibility as they help the economy recover from a painful recession.
I have advocated to keep the asset purchase program open but at a very low level, and wait and see what happens, and as information comes in about the economy we can adjust that program while the federal funds rate remains at zero, St. Louis Federal Reserve bank James Bullard said in an interview with Dow Jones newswire.
The Fed has committed to buying $1.25 trillion of mortgage-backed securities by the end of March. The Fed began buying MBS, mortgage agency debt and longer-term Treasury securities after it had cut rates to near zero but wanted to continue to provide a boost to the economy.
Bullard, who will be a voter on the Fed's policy-setting panel in 2010, said with rates near zero we'd be able to send signals to the markets about what we are thinking about the economy, and how much accommodation the economy needs at various points, by adjusting the asset purchases.