Federal Reserve chairman Ben Bernanke’s speech Friday strengthens the case that the Fed could take action on more asset purchases and strengthen “extended period” language at its November meeting, putting more downward pressure on mortgage rates.
However, while Bernanke noted that there appears to be a case for further Fed action, he also noted that there are some possible risks associated with expanding the Fed’s balance sheet.
Michael Gapen, senior U.S. economist at Barclays, said in a report Friday Bernanke seems to be signaling that the Federal Open Market Committee is likely to mention a plan at its November meeting that will involve incremental asset purchases.
Asset purchases are considered more likely to involve Treasuries than mortgages, but could still contribute to downward pressure on mortgage rates.
