The soaring cost of rent is preventing the Federal Reserve from implementing its planned interest rate cuts.
The soaring cost of rent continues to hamper the Federal Reserve from implementing its planned interest rate cuts — with some analysts fearing that a changing dynamic in the housing market will derail Jerome Powell’s strategy to tame sky-high inflation.
Housing inflation, which reached a peak of 8.2% a year ago, fell to 5.6% in March, which is still too high to allow the Fed to cut its benchmark interest rate.
Economists and Wall Street investors anticipated that housing costs would drop at a quicker pace — allowing the central bank to follow through on its plan to make several rate cuts this year.
But stubbornly high price increases have forced the Fed to keep rates steady — with a rate cut expected no sooner than September, if at all this year.
Last month, Chicago Fed President Austan Goolsbee said that the persistence of outsized price increases in the housing sector was the largest impediment to the central bank’s effort to bring inflation down to its 2% target rate.
“The biggest danger to the inflation picture in my view… (is) the continued high inflation in housing services,” Goolsbee told a gathering of Illinois business people on April 4.
