Powell Admits Fed‘s MBS Purchases During Pandemic May Have Intensified Housing Boom
WASHINGTON,D.C. – october 14, 2025 - Federal Reserve Chair Jerome Powell acknowledged Tuesday the central bank’s large-scale purchases of mortgage-backed securities (MBS) during the pandemic likely contributed too the surge in housing prices, though he suggested the impact may have been less important than some believe. Powell indicated the Fed could be “more nimble” in adjusting its balance sheet in future economic cycles.
The Fed’s actions in 2021, which included driving the average 30-year fixed mortgage rate to an all-time low of 2.65% in January 2021, intensified competition among homebuyers and worsened affordability. While stopping those purchases sooner ”could have made some difference, but not likely enough to fundamentally alter the trajectory of the economy,” Powell stated in a speech Tuesday.
He also pointed to other factors fueling the housing boom, including pandemic-era demand for more space, the rise of remote work (“WFH arbitrage”), and increased savings. Powell has consistently maintained that a primary driver of high housing costs is a nationwide shortage of homes.
Despite calls from some in the mortgage and housing industries to resume MBS purchases to lower current mortgage rates, Powell firmly rejected the idea. “We look at overall inflation; we don’t target housing prices. And we’d certainly not engage in mortgage-backed security purchases as a way of addressing mortgage rates or housing directly,” he said. “That’s not what we do.”
Powell suggested future quantitative easing (QE) programs might be shorter or more targeted, reflecting a lesson learned from the 2020-2021 experience.
