Federal Reserve cuts planned agency purchases to $175 billion

By Jennifer Chiou

New York, Nov. 4 - The Federal Reserve said it will purchase about $175 billion of agency debt, down from the previously announced maximum of $200 billion.

According to a news release, the Fed will also purchase a total of $1.25 trillion of agency mortgage-backed securities to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets.

The amount of agency purchases is consistent with the recent path of purchases and reflects the limited availability of agency debt, the Fed noted.

The release added that information received since the Federal Open Market Committee met in September suggests that economic activity has continued to pick up.

In order to promote a smooth transition in markets, the committee will gradually slow the pace of its purchases of both agency debt and agency mortgage-backed securities and anticipates that these transactions will be executed by the end of the first quarter of 2010, the release said.

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