Tuesday, December 15, 2015
November 2015 CPI
Considering these levels, the expected rise in the Fed Funds Rate is a bit troubling.
As I have mentioned before, interest rates may not be that important. Now, raising rates will have some disinflationary effect, so there is a danger here. But, housing is our constraint now, both on real production and on inflation. As important, or more important, than rates, within some range, is the expansion of mortgage debt outstanding.
There have been false starts before, but recently it looks like mortgage levels have begun to expand again. So, I still have some hope that some force is leading to mortgage expansion - whether that is regulatory, or from development of unconventional mortgage funding sources, or from continued recovery in home equity. Maybe this can save us from ourselves.