Fed officials say they want more evidence that recent improvement in economic activity and labor market conditions is sustainable before tapering its monthly purchases of $40 billion in mortgage-backed securities and $45 billion in long-term Treasurys.

The Fed’s “quantitative easing” helps keep borrowing costs low, but the Fed has been looking for an opportunity to scale back its purchases to avoid creating conditions that could lead to inflation.

The Mortgage Bankers Association is forecasting that the Fed won’t begin “tapering” until early next year, and expects the program will be wound down by September 2014. The trade group anticipates that tapering and other forces will push mortgage rates above 5 percent in 2014 and to 5.3 percent by the end of 2015. Source: federalreserve.gov.

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