Fed contemplates bigger role in economic recovery

Although it appeared the economy was gaining momentum during recent months, new developments has the Federal Reserve questioning if it should try to play a bigger role in recovery in the future.

Although it appeared the economy was gaining momentum during recent months, new developments has the Federal Reserve questioning if it should try to play a bigger role in recovery in the future.

A weak housing market, disappointing job creation and global economic fears continue to weigh heavily on the financial safety and soundness of consumers, says the Wall Street Journal. However, the Fed claims that one way it could help an economic rebound is to have a heavier hand in the mortgage-backed securities market.

"During the next few weeks as I contemplate the future course of monetary policy, I will be asking myself what good would it do to buy more mortgage-backed securities or more Treasurys when we have so much money sitting on the sidelines," said Dallas Fed president Richard Fisher, according to the newspaper.

The yields of mortgage-backed securities are major factors behind the interest rates of home loans. Should the Fed play a role in stimulating demand for these investments, mortgage rates could soon stabilize and start to appreciate in the future.



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