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When the Fed moves to slow inflation and moderate the economy, Boston Fed Pres. Eric Rosengren thinks housing should be targeted first to avoid any \u201cboom and bust.\u201d<\/span><\/span><\/p>\n<\/div>\n BOSTON \u2013 In a recent interview, Federal Reserve Bank of Boston President Eric Rosengren warned that the United States cannot afford a \u201cboom and bust cycle\u201d in the housing market that would threaten financial stability.<\/span><\/span><\/p>\n \u201cIt\u2019s very important for us to get back to our 2% inflation target, but the goal is for that to be sustainable. And for that to be sustainable, we can\u2019t have a boom and bust cycle in something like real estate,\u201d he says.<\/span><\/span><\/p>\n \u201cI\u2019m not predicting that we\u2019ll necessarily have a bust. But I do think it\u2019s worth paying close attention to what\u2019s happening in the housing market,\u201d he adds. \u201cYou don\u2019t want too much exuberance in the housing market. I would just highlight that boom and bust cycles in the real estate market have occurred in the United States multiple times, and around the world, and frequently as a source of financial stability concerns.\u201d<\/span><\/span><\/p>\n Rosengren says the housing market should be a factor as the central bank considers slowing or removing some of the hefty monetary support for the economy introduced during the coronavirus pandemic.<\/span><\/span><\/p>\n To keep the economy moving during the pandemic slowdown, the Fed has been purchasing $40 billion in agency mortgage-backed securities (MBS) per month, along with $80 billion in monthly Treasury debt as part of its asset purchase program.<\/span><\/span><\/p>\n \u201cWhen it is appropriate\u201d to trim that bond buying, Rosengren said MBS purchases should be reduced at the same rate as Treasury purchases. \u201cThat would imply that we would stop purchasing MBS well before we stopped purchasing Treasury securities,\u201d he said.<\/span><\/span><\/p>\n\n