Inflation Watch: April 2011
Inflation, or price-level growth, is important for REALTORS® because it ultimately affects mortgage rates and the ability of home buyers to purchase a home.
Palm Coast, FL – April 26, 2011 – Inflation, or price-level growth, is important for REALTORS® because it ultimately affects mortgage rates and the ability of home buyers to purchase a home. If the Federal Open Market Committee (FOMC) lowers interest rates to stimulate the economy, you may see more home buyers in the market; however, lowering rates can also lead to inflation. So, to combat inflation, the central bank increases interest rates—which may dampen economic growth and demand for home buying.
During the recent financial crisis, fears of deflation (price-level decline) were rampant. With financial markets now stable, some fear that inflation is around the corner. There is also the possibility of stagflation, characterized by high unemployment and high inflation. In stagflation, it is difficult for the central bank to raise interest rates to combat inflation due fear of further job market deterioration if demand is hurt by the increased interest rates.
April 2011 Highlights
- Increases in producer prices are beginning to creep into consumer prices, especially in energy prices.
- Headline consumer prices increased far too quickly in the month; only apparel, computers, and household furnishings have seen price declines.
- A survey of industry economists finds rising prices and the expectation of further price and cost increases.
©National Association of Realtors – reprinted w/permission
Interesting
The charts are an interesting study. If you look at the "concern" columns everything is directly related to our dependence on oil, with the exception of the gold price which what all of the chicken littles of the world are still buying.
It’s good to see some advances with the hybrid / electric cars but we need to find a good alternative to oil. It seems natural gas has a good shot at dethroning king oil but it has some very serious mining issues. If they can figure out how to be good stewards of a natural resource that we have ample supply of we will finally start to free ourselves from the middle eastern grip that we face every day.