Assess the impact of targeted asset purchases by plotting since 2003 on a monthly basis the Federal Reserves holdings of mortgage-backed securities (FRED code: MBST) and (on the right scale) the average yield on 30-year fixed-rate mortgages (FRED code: MORTGAGE30US). Discuss how these purchases might support both the housing market and the banking system.

FRED 1,800,000 1,600,000 1,400,000 1,200,000 e 000,000 800,000 600,000 400,000 200,000 fred stlouisfed.org 2004 2006 Mortgage-backed securities held by the Federal Reserve: All Maturities (left) 30-Year Fixed Rate Mortgage Average in the United States (right) 2012 2014 2008 2010 2016 7.5 7.0 6.0 5.5 5.0 3.5 3.0 myf.red/g/cODV FRED 1,800,000 1,600,000 1,400,000 1,200,000 e 000,000 800,000 600,000 400,000 200,000 fred stlouisfed.org 2004 2006 Mortgage-backed securities held by the Federal Reserve: All Maturities (left) 30-Year Fixed Rate Mortgage Average in the United States (right) 2012 2014 2008 2010 2016 7.5 7.0 6.0 5.5 5.0 3.5 3.0 myf.red/g/cODV