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Fed to Maintain Agency MBS Purchases

Weak economic conditions remain

Oct. 30, 2013

By Mortgage Daily staff

Thanks to continued weakness in the U.S. economy, the Federal Reserve plans to continue its Quantitative Easing strategy at full speed.

In its September employment report, the Department of Labor said that non-farm employers added a meager 148,000 jobs last month.

And while it moved from 7.4 percent in August to 7.2 percent in September, U.S. unemployment still remains elevated.

Citing weak employment, a slowdown in the housing market recovery and restrained economic growth due to fiscal policy, the Federal Open Market decided in its September meeting to hold off in making changes to its QE purchases.

So it will maintain its purchases of agency mortgage-backed securities at $40 billion per month, while its investments in longer-term Treasury securities will continue at a pace of $45 billion a month.

The Fed noted that inflation has been running below the FOMC's longer-run 2 percent objective, though longer-term inflation has remained stable.

"Consistent with its statutory mandate, the committee seeks to foster maximum employment and price stability," the statement said. "The committee expects that, with appropriate policy accommodation, economic growth will pick up from its recent pace and the unemployment rate will gradually decline toward levels the committee judges consistent with its dual mandate. "

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