By Michael S Derby
NEW YORK (Reuters) – Philadelphia Federal Reserve Bank President Patrick Harker said on Tuesday that a housing shortage is the main driver of the nation’s historically high inflation.
“Since the Great Recession, the United States has not built enough housing to keep price growth relatively modest,” Harker said in an article posted on the bank’s website. This shortage is “a major driver of the very high inflation that has plagued our country,” he added.
“Inflation is very high in most goods and services in our economy,” Harker said, noting that the Fed was “stabilizing inflation and putting the economy on a more stable footing in the long run.”
Harker, a non-voting member of the FOMC rate-setting committee, did not comment on the monetary policy outlook in his article.
The central bank was moving ahead with massive interest rate hikes with the aim of taming the highest inflation rate in four decades. Last week, the Federal Open Market Committee raised the overnight target rate range by 0.75 percentage points, to between 3% and 3.25%, as it indicated more increases are ahead.
Federal Reserve officials and many private sector economists associate rising inflation with pandemic-related turmoil and periods of strong government stimulus. Housing was a major factor in the price hike.
Harker’s article noted that housing inflation is “particularly concerning” in part because along with rising food prices, housing factors affect nearly all Americans.
Moreover, “high housing inflation is a macroeconomic problem; money spent on housing is money that is not spent on education, durable goods or meals abroad,” he added.
“We must do everything we can to control housing inflation.”