Thursday, October 11, 2018

September 2018 CPI

Still limping along.  Non-shelter core inflation continues to be pacing along at around 1%.  Possibly shelter inflation might be starting to wane.  This continues to suggest that further rate hikes are unnecessary and potentially disruptive, but rising market rates since the Trump election continue to buffer rising policy rates.

4 comments:

  1. Diplomatically put.

    (It is a fine day when a character like Trump may be more right than the combined intellectual firepower of the entire US Federal Reserve)

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  2. If the Fed keeps monetary policy too tight because of rent inflation, then what do you think is the long-run end-game? Will interest rates wind up very low forever? (because they keep tightening too early)

    I am afraid once consequence is that we'll hit the zero-lower bound again and have another bad recession.

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    Replies
    1. I think those are all reasonable worries.

      I suspect that regulatory limits to mortgage lending also are pushing down interest rates. If that remains the case, I'm not sure if that remains the case in the very long run, or if households will eventually settle into a new equilibrium with less housing consumption that somehow helps yields on housing converge back with yields on other assets.

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