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Can Monetary Policy Tame Rent Inflation?

Author

Listed:
  • Zheng Liu
  • Mollie Pepper

Abstract

Rent inflation has surged since early 2021. Because the cost of housing is an important component of total U.S. consumer spending, high rent inflation has contributed to elevated levels of overall inflation. Evidence suggests that, as monetary policy tightening cools housing markets, it can also reduce rent inflation, although this tends to adjust relatively slowly. A policy tightening equivalent to a 1 percentage point increase in the federal funds rate could reduce rent inflation as much as 3.2 percentage points over 2½ years.

Suggested Citation

  • Zheng Liu & Mollie Pepper, 2023. "Can Monetary Policy Tame Rent Inflation?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2023(04), pages 1-6, February.
    • Handle: RePEc:fip:fedfel:95637
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    References listed on IDEAS

    as
    1. John Mondragon & Johannes F. Wieland, 2022. "Housing Demand and Remote Work," Working Paper Series 2022-11, Federal Reserve Bank of San Francisco.
    2. Augustus Kmetz & John Mondragon & Johannes F. Wieland, 2022. "Remote Work and Housing Demand," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2022(26), pages 1-5, September.
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    Cited by:

    1. Augustus Kmetz & Schuyler Louie & John Mondragon, 2023. "Where Is Shelter Inflation Headed?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, vol. 2023(19), pages 1-6, August.

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