House prices are surging, stocks have continued their stratospheric rise, and banks have more cash than they know what to do with. Yet the Fed is still pumping billions into the economy. Why?
“It’s counterproductive on every level,” said Lou Crandall, chief economist at Wrightson ICAP. “Encouraging more borrowing like this is just not necessary.”
Mohamed El-Erian, chief economic adviser at Allianz, the parent company of asset management giant PIMCO, says the central bank is making things worse by continuing its purchases. Fed Chair Jerome Powell was pressed earlier this month by both Democrats and Republicans on why the central bank continues to snap up $40 billion in mortgage-backed securities each month even as housing prices soar, suggesting that market is in no need of support.
“Nonetheless, housing prices are moving up and of course that makes it more difficult for entry-level buyers to get into the housing market,” he said.
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