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Inflation and Housing

NA-CF146_INFLAT_16U_20150324114209The United States Labor Department reported that the consumer price index rose for the first time in four months this past February.  Overall prices were up 0.2% from January, despite being flat from a year ago.  At the same time, newly built home sales surged 8% this February, which is the highest level since early 2008 according to the Commerce Department.  Sustained pickup could encourage builders to increase construction.  This touches on two areas that the Fed is monitoring closely: the housing market, which policy makers view as slow despite cheap mortgage rates; and inflation, which has been below the Fed’s target for the past three years.  The Fed has suggested it will raise interest rates later this year if the labor market and inflation strengthen.  Inflation is expected to remain low in the short-run, as a strong dollar lowers the price of imports and low energy prices.  Core prices, which exclude food and energy, have climbed 1.7% over the past year.  The rise in core prices has been driven largely by higher costs for housing.  What do you think about this information in context of the Fed’s inflation concerns?



  1. Christian von Hassell Christian von Hassell

    I read a bloomberg article today about how increasing rental prices are driving more and more millenials into purchasing a home. That seems to bode well for the economy and should provide durable goods prices with some upward pricing support. I think that exchange rate risks are going to overshadow strong inflation performance for the foreseeable future, unless we start to see some inflation-driven devaluation of the dollar.

  2. moorem15 moorem15

    I wonder what effect this news will have on the timing of the Federal Reserve to raise interest rates. I read recently that they removed some language from their reports to suggest that they will do so by the middle of the summer.

  3. As to new residential construction, it is booming … relative to 2009. But if you look at the numbers, despite population growth in the interim, the absolute number remains below the worst previous recession in the past 30-odd years, or less than half of peak. If that’s “recovery” then … well, if things actually were to approach pre-bubble levels, we would have already used up all the English-language nouns that might normally have been applied.

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