Fed's Williams: MBS purchases give bigger 'bang for the buck'

PORTLAND, Ore. Thu May 16, 2013 5:01pm EDT

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PORTLAND, Ore. May 16 (Reuters) - The Federal Reserve's purchases of mortgage-backed securities are delivering a bigger kick to the U.S. economy than the central bank's purchases of Treasuries, a top Fed official said on Thursday.

The comments, from San Francisco Federal Reserve President John Williams, signaled support for keeping up purchases of housing-backed bonds even if the Fed starts cutting back on its overall bond purchase program.

"The evidence shows pretty convincingly that MBS purchases have had the biggest bang for the buck on private borrowing rates in the economy," Williams told reporters after a speech here. "If I wanted to keep supporting the economy, I think the MBS is the more powerful" tool.

Williams, who earlier in the day called for possible reductions in Fed bond purchases as soon as this summer, said he did not want to be pinned down to predicting a change of policy for any particular Fed meeting. The Fed's policy-setting panel next meets in mid-June.

He also said that he has personally always believed summer begins when school gets out, in mid-June.

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