The Federal Reserve officials continue to take a wait-and-see approach to ending their $1.25 trillion MBS purchase program by the end of this quarter, according to a statement issued by the Federal Open Market Committee (FOMC).

The Fed is gradually slowing the pace of agency mortgage-backed securities buys and it had already purchased $1.15 trillion in MBS as of Jan. 20. The FOMC "anticipates" that it will complete the MBS purchases of the end of the first quarter.

"The committee will continue to evaluate its purchases of securities in light of the evolving economic outlook and conditions in financial markets," Wednesday's statement said.

The FOMC had the same language in its Dec. 16 statement. Experts seem to be somewhat divided on what will happen to MBS prices once the Fed stops purchasing Fannie Mae, Freddie Mac and Ginnie Mae MBS. Some believe the Fed's exit is well known and the transition will be orderly, resulting in a gradual climb in rates. But others are concerned MBS prices could fall more steeply and push mortgage rates up in a way that could shock the market.

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