Federal Reserve chairman Ben Bernanke Wednesday afternoon said the central bank might scale up its purchases of agency MBS if conditions warrant, but not right now.

Speaking at the conclusion of a two-day Federal Open Market Committee (FOMC) meeting, the Fed chief noted that housing is a key component of the U.S. economy. "The problems in that sector are clearly a big reason why our economy is not recovering more quickly," he said.

In October, the Fed began reinvesting principal payments from its existing holdings of agency MBS (and debt) to purchase newly issued MBS guaranteed by Freddie Mac, Fannie Mae and Ginnie Mae.

However, larger-scale MBS purchases remain a "viable option," Bernanke said, if additional action is needed.

But for now, the Fed is sticking with its plan of keeping its existing $850 billion agency MBS portfolio from shrinking.

At the direction of the FOMC, the New York Federal Reserve Bank began purchasing agency MBS in early October. The New York bank has purchased $20.5 billion in agency MBS through Oct. 26 and plans to purchase another $10 billion by Nov. 10.

Following its September FOMC meeting, the New York Fed also began selling short-term Treasury securities and purchasing longer-term Treasurys.

That action has lowered longer-term rates as anticipated, Bernanke said. "That in turn should lead to still lower mortgage rates," he added.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.