Federal Reserve Chairman Ben Bernanke hinted Thursday, March 25, that the U.S. central bank might start selling some of its $1.25 trillion in holdings of mortgage-backed securities as economic conditions began to improve.
In testimony before the House Financial Services Committee, which had been postponed because of a snowstorm on Feb. 10, Bernanke said that reducing the Fed’s portfolio would “improve the Federal Reserve’s control of financial conditions” so that it could tamp down any inflationary trends.
Bernanke said that the timing of the Fed’s sale of its assets would “depend on economic and financial developments and on our best judgments,” so as to improve employment and maintain price stability.
The Fed has been buying up mortgage-backed securities since December 2008 to help push interest rates down in order to stabilize the faltering housing market. Bernanke has to proceed carefully with shrinking the Fed’s bloated balance sheet so as not to disrupt the Fed’s policy on low mortgage rates.