We have heard it again and again. In a multitude of speeches across the nation, the Governors of the Federal Reserve Board have stated that they are standing strong in the fight against inflation. Therefore, it is not a surprise that the Fed raised short-term rates by three-quarters of one percent last week and issued a statement that recent economic news has not deterred their plans to consider further increases as the year goes on. It is all about inflation right now.
Thus far, the economic news has supported the Fed in their quest. The economy continues to produce a copious number of jobs. Consumers continue to spend, albeit they are borrowing more to keep up the pace. On the other side of the coin, the hottest sector of the economy has cooled significantly. Of course, that sector is real estate.
Some would argue that the real estate market had gotten too hot, and the pace of home price increases was not sustainable. The number of listings is finally increasing, and this will hopefully provide more balance to the market. On the other hand, if the real estate market slows down too much, this factor might cause the Fed to pause their quest because, as we have seen in the past – as the real estate market goes, the economy is likely to follow.