4 ms·

And recent data should make one question why, when remaining inflation is mostly from rent, would this inflation be reduced by increased interest rates. https:

• jbay808 4y ago
  Rising rates means rents will likely be increased and then reduce in the medium term. Conversely, rate cuts would likely induce rents to reduce temporarily and then increase in the long term. There doesn't seem to be any easy solution other than raising rates and then getting over the hill.
  • readthenotes1 4y ago
    Addressing inflation when it shows up instead of claiming baselessly that it's transitory would have been much easier than what they're trying to do now. There is an argument that what the Fed does is mostly irrelevant anyway until the supply chain problems are fixed. Volcker may have done the right thing back in 1981, and he may have been aided greatly by The oil shock being completely absorbed by higher efficiency and more production
    • jbay808 4y ago
      Absolutely they should have moved sooner, and it would have been much less painful. But I don't think there's any irrelevance to what they are doing now. Especially where shelter is concerned.
• readthenotes1 4y ago
  Because the rent addition to inflation lags by nearly a year, the Fed is, in part, fighting last year's war for that. (If I recall correctly, there is still plenty of inflation outside of rent in the current mix. The Fed is fighting last year's war on the other inflations now because for some reason inflation wasn't a trouble until Powell's reconfirmation hearing this year. The old saying of a stitch in time saves nine comes to mind... )
• IAmGraydon 4y ago
  Isn’t it obvious? The price of rent is linked to the price of the asset that is being rented, which is linked to how cheaply leverage can be purchased in the acquisition of the asset. That aside, rent has always made up a larger portion of normal inflation well before 2020. It only makes sense that this holds true now as well.
  • imtringued 4y ago
    The price of rent is linked to the purchasing price not the current asset price. Also interest payments are a large portion of rents.
    • skybrian 4y ago
      I'm not sure that's true. Wouldn't it be indirectly related? Landlords often set prices based on what they think is the market rate. Other landlords who bought their properties at higher prices will tend to raise rents, bringing up the average. Also, someone buying a property might choose to live there instead of renting it out. Not sure how it all shakes out.
    • IAmGraydon 4y ago
      That’s incorrect. It’s a market.
    • swagasaurus-rex 4y ago
      Purchasing price doesn’t cause rent to increase year after year by whatever number the landlord decides
      • Enginerrrd 4y ago
        This is a strange way to say "market forces". If it were arbitrary, the landlord would exceed the price the market would bear and the home would sit vacant. Otherwise, if you think the price is "too high" then the demand exceeds the supply. If you want the practice to fall, either demand must shrink, or supply must increase. Demand can shrink if more people live with roommates or family, or the local population declines. Supply can increase if we build more houses. Inflation means the landlord has to pay more for repairs and upkeep (both in labor and supplies). So, if the deal was "fair" before the increase in expenses, it sounds fair after the increase.