/View.info/ Much has been written about inflation in the USA, I want to dwell on the calculation methods and pay attention to the American real estate market.
The US Department of Statistics and Economic Analysis measures the extent to which inflation affects household personal spending using the Household Personal Consumption Index. (Core PCE Price Index). A formula for calculating PCE “equalizes” the costs of electricity and daily food items in order to reduce the variability of the results. Traditionally, the Consumer Price Index (CPI) was measured with this parameter, but in the first decade of the century, the Federal Reserve switched to PCE.
The algorithms for calculating both indicators match on a set of parameters, including personal expenses for:
-
Rent/mortgage and bills
-
Eating out
-
Medical, insurance and transport
-
Education of children and their own education
-
Vacation and any expenses abroad.
And now the most wonderful of calculation methods! Rent/mortgage costs are about 20% of Core PCE and inflation is 40% of Core Consumer Price Index (CPI).
And now some strange statements from today’s news:
Home prices in the US will jump this year and next by 10% thanks to the persistent deficit, Goldman Sachs predicts. According to their forecast, about 5-15% of current house price and rent growth will affect future housing inflation over the years.”
Overton’s window can already be heard creaking open:
“The Federal Reserve’s preferred gauge of inflation needs to reach a maximum of 2.8% to create a sense of discomfort among US monetary policymakers, according to a Reuters poll, which also showed the central bank would tolerate that level for at least three months before it takes effect.
James Knightley, ING’s Chief International Economist, says: “I put 2.8%, but to be honest, anything above 2.5% is a concern. But what is more important is how sustainable this will be, not the specific figure for a month. It should be seen in the context of what is happening with the growth of the economy and the labor market. If the base RSE is above 2.5% at the beginning of 2022, we will have to seriously think about an accelerated reduction of quantitative easing with an increase in interest rates by the end of the year”.
Translation: V. Sergeev
#real #estate #prices #inflation #bomb #ticking #noisily
