Are Fed Rate Hikes a Thing of the Past?

After hiking interest rates 11 times since March 2022 in its attempt to subdue the highest inflation the U.S. has seen in 40 years, there's good news from the Federal Reserve: On Dec. 13, the Fed announced it is holding the federal funds rate steady at a top target rate of 5.5%, the National Association of Home Builders' Eye On Housing reports. This is the Fed's third consecutive rate pause after the last increase in July.

The Fed’s statement noted that “growth of economic activity has slowed” and “inflation has eased over the past year but remains elevated.” While it appears the Fed is done raising the federal funds rate, the door was kept open for additional increases if inflation were to trend higher. The statement declared this willingness by noting “in determining the extent of any additional policy firming that may be appropriate to return inflation to 2 percent over time” the Fed will take into account the lags of policy and other economic conditions. The Fed however missed an opportunity here to cite the outsized role shelter inflation has played in recent CPI reports. The high cost of development and home construction is slowing the fight against inflation. State and local governments could assist the fight against inflation by addressing the root causes of these rising costs.

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