NEW YORK — Thomas Hoenig, president of the Federal Reserve Bank of Kansas City, said Friday that the planned end of central bank mortgage buying need not push up borrowing costs significantly.
The official was speaking in an interview to be broadcast on public television’s “Nightly Business Report,” and he was asked about the end of the Fed’s $1.25 trillion mortgage-buying effort, which concludes at the end of March.
The program has kept home borrowing rates at rock-bottom levels, and many worry that when the Fed exits the market, rates could jump and endanger the economic recovery.
“I don’t necessarily see that happening,” Hoenig said of a big jump in rates. “We stepped in in an emergency” that is now passing, and a move toward more normal conditions “will allow the market to come in and to provide mortgage credit for the creditworthy borrowers well into the future.”
While some central bankers have expressed some openness to the idea of keeping the buying alive, Hoenig said, “I’m not willing to assume that mortgage rates are going to rise significantly and that we have to step in.”
Hoenig, whose district includes Colorado, is a voting member of the interest-rate-setting Federal Open Market Committee, which last met at the end of January, when officials again pledged to keep rates low for an extended period.
Hoenig dissented from that decision, and he reiterated in the interview that he wants Fed language to be more flexible, not that he wants higher short-term rates now.
