Three US Federal Reserve policymakers said the US government should try new ways to spur the housing market, without agreeing about how much more the central bank needs to do to bring down interest rates.
New York Federal Reserve President William Dudley said in New Jersey on Friday that “additional housing policy interventions” can help boost growth, even as the Fed should consider further easing.
Boston Federal Reserve President Eric Rosengren, speaking in Connecticut, took the more aggressive position of supporting the purchase of mortgage-backed securities, while US Federal Reserve Governor Elizabeth Duke said in Virginia that the central bank’s current monetary stance was “appropriate.”
The comments underscore concerns by US Federal Reserve officials that they may be reaching the limits of their power to boost growth and lower unemployment through three years of near-zero interest rates and unconventional policy tools. US Federal Reserve Chairman Ben Bernanke this week urged lawmakers to do more to revive the housing market, calling it an impediment to the economic recovery. He delivered a 26-page staff report to Congress outlining possible solutions.
“Bernanke realizes that we need to boost housing and if housing does not recover, what the Fed does will be for naught,” said Sung Won Sohn, former chief economist at Wells Fargo & Co who is now a professor at California State University-Channel Islands in Camarillo.
The chairman and his colleagues “are trying to jawbone” the Obama administration, Congress, Fannie Mae and Freddie Mac to support the housing recovery, Sohn said.
Dudley, 59, a former Goldman Sachs Group Inc economist who serves as Federal Open Market Committee vice chairman, said that while the housing market was “only one factor behind the -frustratingly slow” recovery, it is an “important one that deserves our attention.”
He detailed options designed to prevent foreclosures, ease refinancing of mortgages and get renters into lender-owned properties.
Even so, “because the outlook for unemployment is unacceptably high relative to our dual mandate and the outlook for inflation is moderate, I believe it is also appropriate to continue to evaluate whether we could provide additional accommodation in a manner that produces more benefits than costs, regardless of whether action in housing is undertaken or not,” Dudley said to a New Jersey Bankers Association economic forum in Iselin.
Rosengren, speaking in Hartford to the Connecticut Business & Industry Association and MetroHartford Alliance, said buying more mortgage-backed securities “would in my view help provide a more rapid recovery in housing, by reducing the costs of refinancing or purchasing new homes.”