The Federal Reserve is no longer in a position to help America ease its way out of the housing crisis, according to a new report drafted by some of the country’s top economists.
Officials from the Fed, along with several economists and representatives from a number of foreign central banks, recently met at the US Monetary Policy Forum to discuss the continued effect the housing crisis is having on the US economy. The general consensus from the meeting was that there was little more the Fed could do to help, reported CNN Money.
History shows that during hard times, the Fed can lend assistance to the housing market by reducing interest rates and consequently, lower mortgage rates to help borrowers. However, this unprecedented housing crisis has already seen interest rates reduced to near zero, and mortgage rates are lower than they’ve ever been before – but even that isn’t enough to pick things up.
Friday’s meeting discussed the possibility of reducing interest rates even further, through something called quantitative easing – which involves unconventional methods such as asset purchases – but it was thought that such a move would have little impact as most borrowers able to qualify for the lower interest rates have already refinanced their mortgages.
Michael Feroli, an economist with JPMorgan Chase, told CNN Money that the problem was pretty much out of the Fed’s hands.
“Housing cannot be easily addressed by monetary policy,” insisted Feroli.
James Bullard of the St. Louis Fed agreed, adding that “To the extent that you would have policies that are going to help the housing market, they’re not going to come from monetary policy makers.”