Fed's New Plan Focuses On The Housing Market

The Federal Reserve is launching a new plan to bolster economic growth. It will begin buying up mortgage-backed securities — $40 billion a month — in a bid to drive down mortgage rates. The Fed said it would continue until it sees unemployment come down.

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STEVE INSKEEP, HOST:

The Federal Reserve in this country is embarking on another unconventional program to strengthen the sluggish economic recovery. This time, the Fed is focused on the housing market, as NPR's John Ydstie reports.

JOHN YDSTIE, BYLINE: At the end of their two day meeting yesterday, Fed officials said they intend to buy $40 billion a month of mortgage backed securities to help the struggling housing market.

Fed chairman Ben Bernanke explained the rationale at his post meeting new conference.

BEN BERNANKE: Our mortgage backed securities purchases ought to drive down mortgage rates and put down downward pressure on mortgage rates and create more demand for homes and more refinancing.

YDSTIE: The Fed hopes the boost to the housing will spread through the economy, by lifting home prices, increasing people's wealth and confidence and encouraging spending. That could help businesses and promote hiring.

The Fed also made an unusual commitment to keep the stimulus coming, even after the economy strengthens.

BERNANKE: We're not going to be premature in removing policy accommodation. Even after the economy starts to recover more quickly, even after the unemployment rate begins to move down more decisively, we're not going to rush to begin to tighten policy. We're going to give it some time to make sure the recovery is well established.

YDSTIE: Fed officials also extended the period they expect to keep short-term interest rates low to mid-2015.

John Ydstie, NPR News, Washington.

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