The Federal Reserve should not “do” “unpreviously unprecedented” tightening of mortgage-backed securities, Fed officials said on Thursday.
The Federal Open Market Committee’s policy makers also said they are “committed to continuing to tighten the mortgage market” and said the central bank’s decision to hold off on tightening the benchmark mortgage-bond benchmark should not affect the Fed’s ability to raise interest rates.
The comments were made at a meeting of the Fed board, where they were expected to be approved by the full Federal Open Markets Committee.
The Fed has been reviewing the impact of its decision to postpone the next round of rate hikes, which is expected in the coming months.
The central bank will also be considering additional measures to support housing, including a proposal to boost the government’s contribution to mortgage finance.
The committee voted unanimously last month to hold the next rate hike at a rate of 1.25 percent until the end of the year.
It is expected that the Fed will announce further rate increases on May 1, possibly before the Labor Day holiday, which would mark the first time since January 2016 that the central banks policy committee has held off on a rate hike.
The statement came as the Fed continued to weigh the possibility of raising interest rates sooner than later.
It also came a day after the central bankers meeting, when it also delayed a rate increase for another three months.
But the Fed also noted that “a continuation of the rate-tightening policy path” will help to boost inflation, which will be driven largely by the consumer price index, which has fallen by 2.7 percent over the past year.
“We are still committed to continuing our accommodative policy path, but we are more likely to take a longer-term view of the labor market and to adjust our rate targets to the labor markets conditions,” said John Taylor, the Fed chairman, who also serves as president of the Federal Reserve Bank of Boston.
“The labor market is improving, but it will not be sufficient to keep pace with our objective of stabilizing inflation and the overall health of the U.S. economy.”
The Fed last week also said it would begin reducing its benchmark interest rate for longer-duration Treasury bills, a move that would make it easier for some borrowers to borrow at lower rates.
It has also begun to buy bonds that are cheaper than Treasury bills to help ease pressure on the housing market.
The move comes as the Federal Housing Finance Agency (FHFA) is working to help lower mortgage rates and boost home ownership by encouraging homeowners to buy homes.
The FHFA also said Thursday that it has begun to extend its loan guarantees to help first-time home buyers with lower down payments.
The rate increases are expected to help the housing industry, which continues to struggle with the housing crisis.