Feds to Decrease Mortgage-Backed Securities Holdings Amid Triple Rate Hikes and Runaway Inflation

Sharee B.

Over the past twelve months, the rate of inflation has increased dramatically, with current rates at a staggering 6.2%. As store shelves remain partially empty and the price of goods continues to rise, the Federal Reserve has stepped in to alleviate the pressure.

According to sources, Jerome Powell, Chairman of the Federal Reserve, the government will be slowly reducing its stake in mortgage-backed securities in order to lower the rates to a reasonable percentage.

"We are committed to our longer-run goal of 2% inflation and to having longer-term inflation expectations well anchored at this goal," Chairman,Jerome Powell

Currently, the government holds around $120 billion per month in mortgage-backed securities and bond purchases. They will be pulling this back by decreasing buys at a rate of $15 billion monthly. which will bring down the inflation levels by several percentage points.

The move is expected to uplift the economy, which has suffered from a downturn due to pandemic woes, additional variants, vaccination efforts still underway, and home prices fluctuating.

As far as the mortgage industry is concerned, these reductions in holdings will prompt triple rate hikes as the multiple other industries adjust over the next couple of years and credit is tightened. Currently, the housing market is experiencing increases at an average of nearly 6% monthly.

The last time inflation rose as quickly was more than 40 years ago. For now, the government is hoping that things will go according to plan as shipping shortages persist, wages have increased, and businesses have begun to recover.

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