“It’s critical that we go back to our 2% inflation objective, but the goal is to make that a long-term goal. And we can’t have a boom and bust cycle in something like real estate if we want things to be sustainable.”
― Eric Rosengren, President of the Federal Reserve Bank of Boston
In an interview with the Financial Times, Boston Fed President Eric Rosengren expressed concern about the housing market, which comes as data showed house prices are rising. In May, the median price of an existing property for sale increased by 24%. Other housing price indicators are also rising. Rosengren mentioned the issues about financial stability that arise with boom-and-bust real estate cycles. The property market collapsed in 2008, causing a global financial crisis.
Rosengren’s remarks came as the central bank is debating when it should begin reducing the rate of its monthly bond purchases. As of yet, Rosengren’s viewpoint does not appear to be held by the majority of Fed policymakers. In April, MarketWatch’s Greg Robb questioned Fed Chair Jerome Powell on the central bank’s purchase of mortgage-backed securities, which helped to stimulate the housing market. Powell remained unconcerned. “It is not intended to provide direct home market support. It was never the intention to do so. It was just to keep that in mind because it has a close relationship with the Treasury market and is a significant market in its own right. So that’s why, during the Global Financial Crisis, we acquired MBS as well,” Powell explained. He offered no hint that the Fed would differentiate between Treasury and mortgage-backed securities when tapering.
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