US disinflation is on its way, but more patience is needed

US disinflation is on its way, but more patience is needed

After hiking fed funds rate from 0% in February to 3.25% today, the US Federal Reserve (Fed) is starting to see the effects of its aggressive moves to counter inflation. But it will still be a while before we see a real slowdown in consumer-price growth.

The US real estate market has experienced one of the worst contractions on record, as shown in the graph above. But this downturn relates to the prices of homes and not rents – the biggest component of the consumer price index. Rents generally move with a lag of six to nine months behind home prices; as households turn to renting when home prices or interest rates have risen to an extent that buying is no longer an option, pushing up demand for rental properties, and therefore rents. Read more>