The Federal Reserve may not need to buy the full $1.25 trillion in mortgage-backed securities the central bank has authorized by yearend, two regional Fed bank chiefs said.
Richmond Fed President Jeffrey Lacker said Thursday in a speech in Danville, Va., that he would evaluate "whether we need or want the additional stimulus" from buying the full amount. St. Louis Fed President James Bullard, speaking to reporters in Little Rock, said "it might not be necessary."
The Fed's program to buy $1.25 trillion in mortgage bonds guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae is aimed at reducing home-finance costs and arresting the housing slump that triggered the recession. The central bank also intends to buy $300 billion of long-term Treasuries and $200 billion of federal agency debt.
Lacker and Bullard may be "staking out a position rather than reflecting the current consensus on the Federal Open Market Committee," said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City.
The Federal Open Market Committee "is going to be much more concerned about how they manage the phasing out of the mortgage program because the Fed is providing a substantial percentage of the investment in conforming home loan bonds."
The difference between yields on Fannie Mae's current-coupon 30-year fixed-rate mortgage securities and 10-year Treasuries widened 0.01 percentage point Thursday, to 1.03 percentage point in New York, Bloomberg data shows.
Lacker cast the lone dissenting vote in January against the FOMC's commitment to continue buying agency debt and mortgage-backed securities. He has said the central bank should avoid favoring specific credit markets such as mortgages and consumer loans and instead boost the money supply with more "neutral" purchases of Treasuries.
In 2006 the regional bank chief dissented four times in favor of higher interest rates.
While the comments by Lacker and Bullard suggest the Fed's purchases may slow, the central bank disclosed Thursday that it had bought a greater-than-average amount of mortgage bonds for a second straight week, following a period of reduced purchases.
Net purchases totaled $25.4 billion in the week ended Aug. 26, compared with a weekly average of $23.3 billion since the Fed began the initiative in January, according to data posted on the New York Fed's Web site and compiled by Bloomberg.
