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Fed’s Bowman: Housing market rebound could influence fight against inflation

Fed’s Bowman: Housing market rebound could influence fight against inflation

An apparent rebound in the residential housing market could affect the Federal Reserve’s inflation-fighting home prices.”leveling off” even as the bank awaits the impact of falling rents on headline inflation data, Fed Governor Michelle Bowman said Wednesday.

We expect the decline in rents to eventually be reflected in the inflation data as new leases enter the calculationsBowman said in a speech prepared for the “Fed Listens” event, held in Boston and focused on the job market and affordable housing.

For several months, Fed policymakers have said they were counting on a moderation in rental inflation that would eventually lower headline inflation figures, since rents are included in the data using an annual average.

However, to counter this, “the residential real estate market appears to be picking upBowman said. House prices have beenrecently leveled off, which has implications for our fight to reduce inflation.”

Bowman, who has been one of the most hawkish officials at the Fed, did not say how a housing rally might influence his views on monetary policy or the Fed’s decision whether or not to raise interest rates in its meeting June 13-14.

However, it does suggest skepticism about one aspect of inflation that Fed officials have hoped would turn in their favor.

When the Fed started signaling that it was going to raise rates in the fall of 2021, and then followed it up with an aggressive rate hike starting in March of the following year, mortgage rates shot up too. This was followed by a slowdown in sales and a fall in prices.

However, that process may have bottomed out, as the S&P CoreLogic Case-Shiller National Home Price Index rose in February and March month-on-month. Construction and permits may also have hit an all time low, and builder confidence has improved.

Source: Reuters

Source: Gestion

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