Fed's latest QE 'boosting banking profits'

2 October 2012

Banks in the US have experienced a surge in profits since the Federal Reserve (Fed) implemented its third round of quantitative easing (QE), new figures have shown.

Last month (13 September), policymakers at the Fed decided to pump more monetary stimulus into the struggling American economy through the purchasing of additional agency mortgage-backed securities at a pace of $40 billion per month.

And this move appears to have had a positive short-term impact on the home loan sector, as the average rate on a fixed 30-year home loan has hit a new record low of 3.4 per cent, the Financial Times reports.

Steven Abrahams, mortgage strategist at Deutsche Bank, told the news source that the Fed's third round of QE was "some of the best news [banks] could possibly have heard", as the action has boosted activity in the home loan market.

"They will continue originating loans and selling them into the market at a significant premium," he added.

By Tony Aynsley

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