The US will not be able to buy the ‘home’ market, warns the Fed official

A Federal Reserve official has warned the US that it will not be able to “go to extremes” in the real estate market, which could jeopardize economic stability, citing high inflation rates in the central bank.

“It’s very important that we get back to 2% of the inflation risk but the goal is to keep it going,” Eric Rosengren, President of Boston Fed, told the Financial Times. “And for that to happen, we would not have a huge interest rate as a real estate agent.

“I’m not saying we’re going to have a problem. But I think I should take a closer look at what’s going on in the real estate market,” he said.

According to a report released by the National Association of Realtors last week, the average selling price of existing homes rose 23.6% year-on-year in May, by more than $ 350,000 for the first time.

Rosengren said in the real estate market in Boston, it has become common for only buyers to participate in competitive sports, with some refusing to visit homes in order to sell.

“You don’t want to have too much fun in the housing market,” Rosengren said. “I would just say that market corruption has been a thing of the past in the United States, as well as the rest of the world, and it often leads to financial crisis.”

He said the roaring market of houses It should be important because the central bank sees it as reducing or eliminating some of the economic stagnation caused by the coronavirus epidemic.

The Fed has been buying $ 40bn from mortgage lending agencies one month and $ 80bn in Treasury loans each month as part of the purchase price.

Fed officials have now begun talks on how to reduce the debt. And Rosengren said “when necessary”, home mortgage rates should be reduced to a minimum equivalent to what Treasure buys. This means that direct financial assistance for home finances can quickly expire.

“This means we will stop buying MBS properly before we stop buying Treasury security,” he said.

Mr. James Bullard, President of the St Louis Fed, is one of those who have asked the Fed to reconsider their support in the real estate market in comparison to what they saw as complaints about the forthcoming screams.

Robert Kaplan, President of the Dallas Fed, has also called for the purchase to end “soon”, especially given the high level of financial speculation in the housing market.

The Fed has said it will start cutting back on its stock supply as soon as it “goes further” towards its 2% inflation targets and overall performance.

As a result of the speedy recovery, Rosengren says “the conditions for thinking we have done very well will probably be fulfilled before next year”.

Recent finances demonstrations by the Fed showed central bank regulators increasing interest rates from 2023, more than ever before. He also revealed major divisions within the Federal Open Market Committee on how to manage the finances more than they normally would.

“There is a great deal of uncertainty in the predictions,” Rosengren said. “Some people should grow up very fast [and] rigid values ​​may occur soon. And for some as a result, recovery may be delayed. ”