Federal Reserve Chairman Ben Bernanke said that the Fed will begin later this year to ease up on its controversial stimulus program, which has helped to keep interest rates low. Bernanke said that the program—which includes buying up $85 billion a month in U.S. bonds and mortgage-backed securities to help strengthen the economy—may end entirely by the middle of 2014.
The Fed has signaled that it will end the “quantitative easing” program if unemployment falls to under 7 percent. Unemployment is projected to reach 6.5 percent in 2014, according to the Fed’s projections. Currently, unemployment stands at 7.6 percent.
Bernanke said that the Fed will “ease the pressure on the accelerator” if the economy continues to show improvement. The Fed has kept interest rates low to stimulate the economy and the low rates have helped boost housing affordability.
"The fundamentals look a little better to us, in particular the housing sector," Bernanke said about the decision. "State and local governments are now coming to a position where they don't have to lay off a lot of workers. The economy is improving."
Bernanke said the Fed will adjust accordingly if the economy veers from projections.
In a new report, economists with Freddie Mac say that the housing market shouldn't fear rising mortgage rates. It would take interest rates rising closer to 7 percent before families earning median incomes would face housing affordability issues, according to the mortgage giant’s latest U.S. Economic and Housing Market Outlook.
Source: “Fed sets road map for end of stimulus,” CNNMoney (June 19, 2013)
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