Fed’s Bowman Says Real Estate Rebound Affects Inflation Fight

(Bloomberg) — Federal Reserve Governor Michelle Bowman said rebounding home prices could impact the US central bank’s work to lower inflation.

“While we expect lower rents will eventually be reflected in inflation data as new leases make their way into the calculations, the residential real estate market appears to be rebounding, with home prices leveling out recently, which has implications for our fight to lower inflation,” Bowman said Wednesday in remarks prepared for a Fed Listens event in Boston.

Policymakers have raised interest rates quickly over the past 14 months, bringing the federal funds rate to a range of 5% to 5.25%, from near zero, in a effort to cool prices. 

Since their meeting earlier this month, some officials have said it may be time to pause rate increases in order to assess how their policy so far has impacted the economy. Others argue that persistent inflation shows they need to keep going, or resume hikes later if they skip raising at their June 13-14 meeting.

A report earlier this month showed new-home sales unexpectedly rose in April to the highest level since March 2022, indicating builders continue to benefit from limited inventory in the resale market. 

©2023 Bloomberg L.P.

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