Reply #4: Fed officials divided over timing of asset sales

[ozymandius]

WASHINGTON – Federal Reserve officials were divided over when the Fed should start shedding its vast portfolio of mortgage securities. The tricky endeavor would move the central bank closer to tightening credit for millions of Americans.

Minutes of the Fed's closed-door meeting April 27-28 released Wednesday show Fed officials expressed wide-ranging views about when and how the Fed should go about selling some of the $1.25 trillion of mortgage securities bought during the financial and economic crises. The assets were purchased to drive down mortgage rates and aid the housing market.

The minutes also reveal that some officials had new concerns that the European debt crisis could slow the U.S. recovery. At the same time, Fed officials offered a more upbeat outlook for the U.S. economy with stronger growth, slightly lower unemployment and tame inflation.

On the mortgage securities matter, the challenge is to sell those assets in a way that doesn't weaken home prices and jack up mortgage rates.

Most Fed officials expressed a preference for strategies that would "eventually" lead to the sale of mortgage securities in an effort to shrink the Fed's $2.3 trillion balance sheet back to a more normal size. And, they thought that any move to sell the assets should be communicated in advance. But they differed on the timing and the details of how to do this.

http://news.yahoo.com/s/ap/20100519/ap_on_bi_ge/us_fed_minutes