From another of those observers who pointed out the real estate component of official inflation reports, (When Will the Brutal Spike in Rents Drive Up CPI Inflation? How Much Will it Add to CPI?, February 28, 2022), here's Wolf Richter at Wolf Street, September 16:
The purpose of MBS purchases was to repress mortgage rates and inflate home prices. That process has already started to reverse.
A date for history: Today, September 15, the Fed stopped buying mortgage-backed securities altogether. It had been tapering its purchases since late last year. Since June, when the phase-in of QT started, it still purchased MBS to replace some of the pass-through principal payments from mortgage payoffs and mortgage payments that reduced the balance of its MBS faster than the cap of $17.5 billion. The idea was to keep the run-off of MBS within the cap of $17.5 billion in June, July, and August. But this circus is finally over.
On today’s release of scheduled purchases by the New York Fed, there were zero MBS purchases scheduled:
The Fed’s final trade in MBS.
Yesterday, September 14, the Fed conducted its final purchase of MBS. The Fed bought $387 million in MBS in the To Be Announced (TBA) market, which is a minuscule amount by the Fed’s standards. It went out with a whimper, so to speak....
....MUCH MORE
This was one of the factors alluded to in our latest look at the Fed's balance sheet on Friday as a possible reason to think we might see actual QT. The other factor is the Fed's habit of allowing more run-offs in the second half of the month.
....There are a couple reasons to think next week's report might show the Fed picking-up the pace but if it doesn't happen, large-x-large, we'll have to conclude that, in the words of the philosopher (Phil Collins anyway):....
