The Hot Housing Market Makes the Fed’s Inflation-Fighting Job Even Tougher
“Federal Reserve officials are counting on higher mortgage rates to throw cold water on the frenzied housing market as they work to tame the highest inflation in decades. But the market may not cool fast enough. While rising rates and higher home prices are starting to lock some buyers out and weaken sales, pent up demand for housing, combined with a stark shortage of homes on the market, is still putting upward pressure on prices. A dearth of housing inventory also means that rising rates may not slow homebuilding activity as much as they have in the past.”
Europe Inflation Seen Surpassing U.S. for First Time in a Decade
“For the first time in over a decade, traders are anticipating faster inflation in Europe than the U.S. as the war in Ukraine drives up energy prices. Markets are expecting euro-area inflation of 3.02% over the next decade, compared with 3.00% for the U.S., according to swap contracts linked to consumer prices. The last time these rates flipped was in 2009 during the global financial crisis.”
Japan Seen Unlikely to Intervene on Yen With Fed’s Jumbo Hike Looming
“Japan has plenty of reasons to avoid directly intervening in currency markets to prop up the yen, especially ahead of the Federal Reserve’s expected rate hike on Wednesday, economists say. “There’s almost zero chance they would intervene before the Fed’s decision,” said Masaaki Kanno, chief economist at Sony Financial Group, indicating there was even less chance of Japan influencing the direction of the currency when a 50 or 75 basis point U.S. rate increase looms with more to come.”
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