bearish

Fed Policy Outlook: Could Housing's Resilience Force a Higher Inflation Target?

391 Views03 Sep 2023 16:48
SUMMARY
  • Lack of existing homes for sale has supported the demand for new homes where homebuilders have assisted buyers via mortgage rate buy downs.
  • House price appreciation has resumed again, despite tougher comparisons, thereby helping to support aggregate demand. Future disinflation could spark swiftly declining borrowing costs, thereby complicating policy conduct for the Fed.
  • Further home price appreciation could undermine the Fed's efforts to achieve 2% inflation, but political pressure to raise the target could increase in order to maximise full employment and homeownership.
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