Federal Reserve System

More stories

  • 125 Shares179 Views

    in Economy

    Fed Officials Are on the Defensive as High Inflation Lingers

    by

    Christopher Waller, a governor at the Federal Reserve, faced an uncomfortable task on Friday night: He delivered remarks at a conference packed with leading academic economists titled, suggestively, “How Monetary Policy Got Behind the Curve and How to Get Back.”Fed officials — who set America’s monetary policy — have found themselves on the defensive in Washington, on Wall Street and within the economics profession as inflation has run at its fastest rate in 40 years. Friday’s event, at Stanford University’s Hoover Institute, was the clearest expression yet of the growing sense of skepticism around the Fed’s recent policy approach.The Fed is raising interest rates, and on Wednesday lifted them by the largest increment since 2000. But prominent economists on Friday blasted America’s central bankers for being slow to realize that inflation was going to run meaningfully higher in 2021 as big government spending goosed consumer demand. They criticized the Fed for taking monetary policy support away from the economy too haltingly once it began to react. Some suggested that it was still moving tentatively when more decisive action was warranted.Mr. Waller defended and explained the decisions the Fed made last year. Many inflation forecasters failed to predict the 2021 price burst, he noted, pointing out that the Fed pivoted toward removing policy support starting as early as September, when it became clear that inflation was a problem.“The Fed was not alone in underestimating the strength of inflation that revealed itself in late 2021,” said Mr. Waller, who expected inflation to be slightly higher than many of his colleagues. He noted that the Fed’s policy-setting committee had to coalesce around policy moves, which can take time given its size: It has 12 regional presidents and up to seven governors in Washington.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve began raising interest rates for the first time since 2018. Here is what the increases mean for consumers.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.“This process may lead to more gradual changes in policy as members have to compromise in order to reach a consensus,” Mr. Waller said.Such explanations have done little to shield the Fed so far. Lawrence H. Summers, a former Harvard president and Treasury secretary, suggested earlier Friday that an economic overheating was predictable last year as the government spent heavily and that “it was reasonable to expect that the bathtub would overflow.” Kevin Warsh, a former Fed governor, called inflation “a clear and present danger to the American people,” and declared the Fed’s reaction “slow.”And even as the Fed comes under fire for responding too ploddingly as inflation pressures began to build, a new debate is evolving over how quickly — and how much — rates need to increase to catch up and wrestle fast price increases back under control.The Fed lifted interest rates half a percentage point this week and forecast more to come. Still, Jerome H. Powell, the Fed chair, said officials were not discussing an even larger, 0.75-point move — suggesting that central bankers are still hoping to control inflation without choking off growth abruptly and shocking the economy.“If supply constraints unwind quickly, we might only need to take policy back to neutral or go modestly above it to bring inflation back down,” Neel Kashkari, the president of the Federal Reserve Bank of Minneapolis, wrote in a post on Friday. “Neutral” refers to the policy setting that neither stokes nor slows the economy.Inflation F.A.Q.Card 1 of 6What is inflation? More

  • 150 Shares169 Views

    in Economy

    Fed Raises Interest Rate Half a Percentage Point, Largest Increase Since 2000

    by

    #g-target-rate-recessions-box , #g-target-rate-recessions-box .g-artboard { margin:0 auto; } #g-target-rate-recessions-box p { margin:0; } #g-target-rate-recessions-box .g-aiAbs { position:absolute; } #g-target-rate-recessions-box .g-aiImg { position:absolute; top:0; display:block; width:100% !important; } #g-target-rate-recessions-box .g-aiSymbol { position: absolute; box-sizing: border-box; } #g-target-rate-recessions-box .g-aiPointText p { white-space: nowrap; } #g-target-rate-recessions-335 { position:relative; overflow:hidden; } #g-target-rate-recessions-335 p { font-family:nyt-franklin,arial,helvetica,sans-serif; font-weight:700; line-height:15px; height:auto; opacity:1; […] More

  • 163 Shares189 Views

    in Economy

    The Fed Wants to Fight Inflation Without a Recession. Is It Too Late?

    by

    Federal Reserve officials took a while to recognize that inflation was lasting. The question is whether they can tame it gently now.The Federal Reserve is poised to set out a path to rapidly withdraw support from the economy at its meeting on Wednesday — and while it hopes it can contain inflation without causing a recession, that is far from guaranteed.Whether the central bank can gently land the economy is likely to serve as a referendum on its policy approach over the past two years, making this a tense moment for a Fed that has been criticized for being too slow to recognize that America’s 2021 price burst was turning into a more serious problem.The Fed chair, Jerome H. Powell, and his colleagues are expected to raise interest rates half a percentage point on Wednesday, which would be the largest increase since 2000. Officials have also signaled that they will release a plan for shrinking their $9 trillion balance sheet starting in June, a policy move that will further push up borrowing costs.That two-front push to cool off the economy is expected to continue throughout the year: Several policymakers have said they hope to get rates above 2 percent by the end of 2022. Taken together, the moves could prove to be the fastest withdrawal of monetary support in decades.The Fed’s response to hot inflation is already having visible effects: Climbing mortgage rates seem to be cooling some booming housing markets, and stock prices are wobbling. The months ahead could be volatile for both markets and the economy as the nation sees whether the Fed can slow rapid wage growth and price inflation without constraining them so much that unemployment jumps sharply and growth contracts.“The task that the Fed has to pull off a soft landing is formidable,” said Megan Greene, chief global economist at the Kroll Institute, a research arm of the Kroll consulting firm. “The trick is to cause a slowdown, and lean against inflation, without having unemployment tick up too much — that’s going to be difficult.”Optimists, including many at the Fed, point out that this is an unusual economy. Job openings are plentiful, consumers have built up savings buffers, and it seems possible that growth will be resilient even as business conditions slow somewhat.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.But many economists have said cooling price increases down when labor is in demand and wages are rising could require the Fed to take significant steam out of the job market. Otherwise, firms will continue to pass rising labor costs along to customers by raising prices, and households will maintain their ability to spend thanks to growing paychecks.“They need to engineer some kind of growth recession — something that raises the unemployment rate to take the pressure off the labor market,” said Donald Kohn, a former Fed vice chair who is now at the Brookings Institution. Doing that without spurring an outright downturn is “a narrow path.”Fed officials cut interest rates to near-zero in March 2020 as state and local economies locked down to slow the coronavirus’s spread at the start of the pandemic. They kept them there until March this year, when they raised rates a quarter point.But the Fed’s balance-sheet approach has been the more widely criticized policy. The Fed began buying government-backed debt in huge quantities at the outset of the pandemic to calm bond markets. Once conditions settled, it bought bonds at a pace of $120 billion, and continued making purchases even as it became clear that the economy was healing more swiftly than many had anticipated and inflation was high.Late-2021 and early-2022 bond purchases, which are what critics tend to focus on, came partly because Mr. Powell and his colleagues did not initially think that inflation would become longer lasting. They labeled it “transitory” and predicted that it would fade on its own — in line with what many private-sector forecasters expected at the time.When supply chain disruptions and labor shortages persisted into the fall, pushing up prices for months on end and driving wages higher, central bankers reassessed. But even after they pivoted, it took time to taper down bond buying, and the Fed made its final purchases in March. Because officials preferred to stop buying bonds before lifting rates, that delayed the whole tightening process.The central bank was trying to balance risks: It did not want to quickly withdraw support from a healing labor market in response to short-lived inflation earlier in 2021, and then officials did not want to roil markets and undermine their credibility by rapidly reversing course on their balance sheet policy. They did speed up the process in an attempt to be nimble.Under Jerome H. Powell, the Fed, which meets on Wednesday, is trying to walk a thin line.Nate Palmer for The New York Times“In hindsight, there’s a really good chance that the Fed should have started tightening earlier,” said Karen Dynan, an economist at the Harvard Kennedy School and a former Treasury Department chief economist. “It was really hard to judge in real time.”Nor was the Fed’s policy the only thing that mattered for inflation. Had the Fed begun to pull back policy support last year, it might have slowed the housing market more quickly and set the stage for slower demand, but it would not have fixed tangled supply chains or changed the fact that many consumers have more cash on hand than usual after repeated government relief checks and months spent at home early in the pandemic.Inflation F.A.Q.Card 1 of 6What is inflation? More

  • 188 Shares199 Views

    in Economy

    The Fed’s favorite inflation index is still rising fast, but shows some hints of slowing.

    by

    The price index that the Federal Reserve watches most closely climbed 6.6 percent in the year through March, the fastest pace of inflation since 1982 and the latest reminder of the painfully rapid price increases plaguing consumers and challenging policymakers.Much of the gain in the Personal Consumption Expenditures price index, released Friday, was driven by a pop in energy prices that came early in Russia’s invasion of Ukraine along with rising food costs. After stripping out volatile food and fuel prices, a core index climbed by a slightly more muted 5.2 percent in the year through March.On a monthly basis, that core measure picked up by 0.3 percent, slower than its pace the previous month.Central bank and White House officials spent much of 2021 hoping that a pandemic-era surge in used car prices and cost increases in other goods would fade as supply chains returned to normal, and strong demand cooled. But inflation has remained too high for the Fed’s comfort for a year, despite occasional hopeful signs like the latest monthly slowdown in the core measure, and its persistence is now drawing a firm response from the central bank.Policymakers lifted interest rates in March for the first time since 2018, and have set the stage for an even larger rate increase at their meeting next week. Many Fed officials now expect to raise rates back to a neutral setting — around 2 percent — by the end of the year as they try to slow down borrowing, temper demand and allow supply to catch up. The goal is to help cool off inflation so that it does not become locked into consumer and business expectations, which might make it a more permanent feature of America’s economy.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The task ahead is difficult. The Fed has in the past caused recessions while trying to weigh down high inflation. Officials are constraining demand just as the war in Ukraine ramps up uncertainty and threatens to keep prices for gas and other commodities elevated, potentially making the cental bank’s job even more challenging.White House officials have been emphasizing the role that the war is playing in elevating inflation, often blaming President Vladimir V. Putin of Russia for higher prices. While Russia’s invasion did push gas prices sharply higher last month, inflation had been high for months before the conflict.Government spending helped fuel some of that increase. As households received stimulus checks and expanded unemployment benefits in 2020 and 2021, they built up cash buffers, which has helped to sustain fervid spending on couches, cars and grills even as costs have climbed higher. Strong demand for goods in particular collided with shutdowns of overseas factories and overburdened transit routes to spur shortages and push prices up.Now, though, inflation has become broader. As employers struggle to hire enough workers to meet strong consumer demand, they are paying higher wages. That could prompt some businesses to charge more to cover their rising costs. It could also help households to keep up their spending.A number of services — notably rents and restaurant meals — have grown more expensive in recent months.The Fed is trying to keep those widespread price pressures from becoming embedded. While officials still expect price increases to begin fading soon and to be running considerably slower by the end of the year, they are no longer betting on that outcome.Inflation F.A.Q.Card 1 of 6What is inflation? More

  • 125 Shares199 Views

    in Economy

    Senate Confirms Biden Fed Nominee, Lael Brainard, as Vice Chair

    by

    The Senate voted to confirm one of President Biden’s nominees to the Federal Reserve’s Board of Governors, making Lael Brainard the central bank’s vice chair.Ms. Brainard, a Fed governor since 2014 who was originally nominated to the institution by President Barack Obama, was a key architect of the central bank’s response in 2020 as state and local lockdowns tied to the pandemic roiled markets and sent unemployment rocketing higher. She has been a close adviser to Jerome H. Powell, the Fed chair.Ms. Brainard received some bipartisan support, and passed the Senate in a 52-to-43 vote.The White House has also nominated Mr. Powell to another four-year term as chair. Mr. Powell, who was first appointed to the Fed by Mr. Obama, became chair in 2018 during the Trump administration. Mr. Biden has also nominated the economists Philip N. Jefferson and Lisa D. Cook to fill two open governor positions.Votes on those three nominees are expected soon.If all are confirmed, the four officials will make up a majority of the Fed’s seven-person Board of Governors in Washington, giving Mr. Biden a chance to leave his mark on the institution. Fed governors hold a constant vote on monetary policy, which they set alongside the central bank’s 12 regional reserve bank presidents, who vote on a rotating basis.But even as it gains new faces, the Fed is likely to stick to the course it has already begun to chart as it battles stubbornly rapid inflation. The central bank raised interest rates at its meeting in March and is expected to make an even bigger rate increase at its meeting next Tuesday and Wednesday. Policymakers have also signaled that they will soon begin to shrink their balance sheet of bond holdings in a bid to push up longer-term interest rates and further slow the economy.By making money more expensive to borrow, the Fed can slow down spending, which could allow inflation to moderate over time as supply catches up with demand. During their hearings, the nominees made it clear that they were committed to bringing down high inflation. Ms. Brainard and Mr. Powell regularly address that goal in public remarks.The central bank is hoping that it can calm the economy without pushing the unemployment rate higher and sending it into a recession.“I don’t think you’ll hear anyone at the Fed say that that’s going to be straightforward or easy,” Mr. Powell said at an event on Thursday. “It’s going to be very challenging. We’re going to do our very best to accomplish that.”The Senate has yet to start the process for voting on Mr. Biden’s fifth and most recent pick for the Fed Board: The White House this month nominated Michael S. Barr as the Fed’s vice chair for supervision. The White House’s initial nominee, Sarah Bloom Raskin, failed to secure enough support and was withdrawn from consideration for the job.Mr. Barr must appear before and then pass the Senate Banking Committee before advancing to a confirmation vote in the full Senate. More

  • 138 Shares169 Views

    in Economy

    Rapid Inflation, Lower Employment: How the U.S. Pandemic Response Measures Up

    by

    The United States spent more on its policy response than other advanced economies. Now economists are revisiting how that worked.The United States spent more aggressively to protect its economy from the pandemic than many global peers, a strategy that has helped to foment more rapid inflation — but also a faster economic rebound and brisk job gains.Now, though, America is grappling with what many economists see as an unsustainable worker shortage that threatens to keep inflation high and may necessitate a firm response by the Federal Reserve. Yet U.S. employment has not recovered as fully as in Europe and some other advanced economies. That reality is prodding some economists to ask: Was America’s spending spree worth it?As the Fed raises interest rates and economists increasingly warn that it may take at least a mild recession to bring inflation to heel, risks are mounting that America’s ambitious spending will end up with a checkered legacy. Rapid growth and a strong labor market rebound have been big wins, and economists across the ideological spectrum agree that some amount of spending was necessary to avoid a repeat of the painfully slow recovery that followed the previous recession. But the benefits of that faster recovery could be diminished as rising prices eat away at paychecks — and even more so if high inflation prods central bank policymakers set policy in a way that pushes up unemployment down the road.“I’m worried that we traded a temporary growth gain for permanently higher inflation,” said Jason Furman, an economist at Harvard University and a former economic official in the Obama administration. His concern, he said, is that “inflation could stay higher, or the Fed could control it by lowering output in the future.”The Biden administration has repeatedly argued that, to the extent the United States is seeing more inflation, the policy response to the pandemic also created a stronger economy.“We got a lot more growth, we got less child poverty, we got better household balance sheets, we have the strongest labor market by some metrics I’ve ever seen,” Jared Bernstein, an economic adviser to President Biden, said in an interview. “Were all of those accomplishments accompanied by heat on the price side? Yes, but some degree of that heat showed up in every advanced economy, and we wouldn’t trade that back for the historic recovery we helped to generate.”Inflation has picked up around the world, but price increases have been quicker in America than in many other wealthy nations.Consumer prices were up 9.8 percent in March from a year earlier, according to a measure of inflation that strips out owner-occupied housing to make it comparable across countries. That was faster than in Germany, where prices rose 7.6 percent in the same period; the United Kingdom, where they rose 7 percent; and other European countries. Other measures similarly show U.S. inflation outpacing that of its global peers.The Rise of InflationInflation has risen worldwide in the past year, but the increase has been fastest in the United States.

    .dw-chart-subhed {
    line-height: 1;
    margin-bottom: 6px;
    font-family: nyt-franklin;
    color: #121212;
    font-size: 15px;
    font-weight: 700;
    }

    Change in consumer prices from a year earlier
    Note: Euro area and U.K. data are Harmonised Index of Consumer Prices. U.S. data is the Consumer Price Index excluding owners’ equivalent rent.Sources: U.S. Bureau of Labor Statistics, O.E.C.D., EurostatBy The New York TimesThe comparatively large jump in prices in America owes at least partly to the nation’s ambitious spending. Research from the Federal Reserve Bank of San Francisco attributed about half of the nation’s 2021 annual price increase to the government’s spending response. The researchers estimated the number, which is imprecise, by measuring America’s inflation outcome compared with what happened in countries that spent less.“The size of the package was very large compared to any other country,” said Òscar Jordà, a co-author on the study.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.The Trump and then Biden administrations spent about $5 trillion on pandemic relief in 2020 and 2021 — far more as a share of the nation’s economy than what other advanced economies spent, based on a database compiled by the International Monetary Fund. Much of that money went directly to households in the form of stimulus checks, expanded unemployment insurance and tax credits for parents.Payments to households helped to fuel rapid consumer demand and quick economic growth — progress that has continued into 2022. A global economic outlook released by the International Monetary Fund last week showed that America’s economy is expected to expand by 3.7 percent this year, faster than the roughly 2 percent trend that prevailed before the pandemic and the 3.3 percent average expected across advanced economies this year.That comes on the heels of even more rapid 2021 growth. And as the U.S. economy has expanded so quickly, unemployment has plummeted. After spiking to 14.7 percent in early 2020, joblessness is now roughly back to the 50-year lows that prevailed prior the pandemic.That’s a victory that politicians have celebrated. “Our economy roared back faster than most predicted,” Mr. Biden said in his State of the Union address last month. A major report from the White House on April 14 noted that the United States has experienced a faster recovery than other advanced economies, as measured by gross domestic product, consumer spending and other indicators.The Rebound in SpendingConsumer spending has recovered more quickly in the United States, even after accounting for faster inflation.

    .dw-chart-subhed {
    line-height: 1;
    margin-bottom: 6px;
    font-family: nyt-franklin;
    color: #121212;
    font-size: 15px;
    font-weight: 700;
    }

    Change in per capita household spending since fourth quarter of 2019
    Notes: Quarterly data, adjusted for inflationSource: O.E.C.D.By The New York TimesBut increasingly, at least when it comes to the job market, America’s achievement looks less unique.Unemployment in the United States jumped much higher at the outset of the pandemic in part because America’s policies did less to discourage layoffs than those in Europe. While many European governments paid companies to keep workers on their payrolls, the U.S. focused more on providing money directly to those who lost their jobs.Joblessness fell fast in the United States, too, but that was also true elsewhere. Many European countries, Canada and Australia are now back to or below their prepandemic unemployment rates, data reported by the Organization for Economic Co-operation and Development showed.And when it comes to the share of people who are actually working, the United States is lagging some of its global peers. The nation’s employment rate is hovering around 71.4 percent, still down slightly from nearly 71.8 percent before the pandemic began.By comparison, the eurozone countries, Canada and Australia have a higher employment rates than before the pandemic, and Japan’s employment rate has fully recovered.The Rebound in JobsEmployment rates fell further in the U.S. than in many peer countries, and have not yet returned to their prepandemic level.

    .dw-chart-subhed {
    line-height: 1;
    margin-bottom: 6px;
    font-family: nyt-franklin;
    color: #121212;
    font-size: 15px;
    font-weight: 700;
    }

    Change in employment rate since fourth quarter of 2019
    Note: Quarterly data, ages 15 to 64Source: O.E.C.D.By The New York TimesEurope’s more complete employment recovery may partly reflect its different regulations and different approach to supporting workers during the pandemic, said Nick Bennenbroek, international economist at Wells Fargo. European aid programs effectively paid companies to keep people on the payroll even when they couldn’t go to work, while the United States supported workers directly through the unemployment insurance system.That relatively subtle difference had a major consequence: Because fewer Europeans were separated from employers, many flowed right back into their old jobs as the economy reopened. Meanwhile, pandemic layoffs touched off an era of soul-searching and job shuffling in the United States.“You didn’t have as much motivation to reconsider your assessment of your work-life situation,” Mr. Bennenbroek said. “What we initially saw in the U.S. was much more disruptive.”Inflation F.A.Q.Card 1 of 6What is inflation? More

  • 113 Shares189 Views

    in Economy

    How Rising Mortgage Rates Are Affecting the Housing Market

    by

    Mortgage costs have jumped as the Federal Reserve has raised rates. With higher rates come fewer offers.Luis Solis, a real estate agent in Portland, Ore., marked a milestone weekend late last month. It was the first time in two years that one of his listings made it to Monday without any offers.This particular house was listed at $500,000, and after a Saturday open house there were promises of at least three bids, including one for $40,000 over the asking price. Then Monday came, and there were none. Then Tuesday, and Wednesday. An offer finally came in, but instead of being 10 to 15 percent higher than the listing — something that became almost standard at the height of the coronavirus pandemic’s housing market — it was right at $500,000. And it was the only one. And the buyer took it.“We didn’t have the competing offers that would drive up the price,” Mr. Solis said. “It’s not crazy like it was.”Taking some air out of the crazed market — and the hot economy in general — is precisely what the Federal Reserve wanted to do when it raised its key interest rate in March and signaled more increases to come. Mortgage rates have surged in response, jumping to 5 percent from slightly more than 3 percent since the start of the year.That rise means the monthly payment on a $500,000 house like the one Mr. Solis just sold would be about $500 more a month than it was at the end of last year, assuming a fixed-rate mortgage and 20 percent down payment. And the higher cost comes on top of a more than 30 percent rise in home prices over the past two years, according to Zillow.Now early data and interviews across the industry suggest that many buyers have finally been exhausted by declining affordability and cutthroat competition, causing the gravity-defying pandemic housing market to start easing up.Open houses have thinned. Online searches for homes have dropped. Homebuilders, many of whom have accrued backlogs of eager buyers, say rising mortgage rates have forced them to go deeper into those waiting lists to sell each house. In a recent survey of builders, Zelman & Associates, a housing research firm, found that while builders were still seeing strong demand, cancellations had inched up, though still well below historically low levels. Builders have also grown increasingly concerned about rising mortgage rates and surging home prices.“There is a lot more concern than there had been,” said Ivy Zelman, chief executive of Zelman & Associates.By any standard that prevailed before 2020, this would be a hot real estate market. Home prices remain high, and not only is there little sign they will fall anytime soon, but many economists predict a continued rise through the year. Still, after two years of torrid demand, agents had become accustomed to fielding multiple offers for each listing and setting price records each weekend. That frenzy, brought on by pandemic migrations and the growing centrality of the home as a space where people both live and work, is now subsiding.“We’re seeing some early indications that a growing share of home buyers, especially in expensive coastal markets, are getting priced out,” said Daryl Fairweather, chief economist at Redfin.Understand Inflation in the U.S.Inflation 101: What is inflation, why is it up and whom does it hurt? Our guide explains it all.Your Questions, Answered: Times readers sent us their questions about rising prices. Top experts and economists weighed in.Interest Rates: As it seeks to curb inflation, the Federal Reserve announced that it was raising interest rates for the first time since 2018.How Americans Feel: We asked 2,200 people where they’ve noticed inflation. Many mentioned basic necessities, like food and gas.Supply Chain’s Role: A key factor in rising inflation is the continuing turmoil in the global supply chain. Here’s how the crisis unfolded.For buyers, however, the market will still feel plenty competitive. Even if prices aren’t rising at the pace of the past two years, homes are selling within a week of being listed and posting no significant price declines.Construction in Missoula, Mont. Among homebuilders, “there is a lot more concern than there had been,” said Ivy Zelman of Zelman & Associates.Tailyr Irvine for The New York TimesThat rising mortgage rates have not had more of an effect shows how difficult it is to tamp down prices and bring demand into balance in an economy where a lack of supply — marked by half-empty car lots, furniture order backlogs and a paucity of homes for sale — is playing a guiding role.In the prepandemic world of bustling offices and smoothly functioning supply chains, such a steep rise in mortgage rates, on top of years of double-digit price appreciation, would have economists predicting a severe drop in demand and maybe even falling prices. Those trends would have echoed through the broader economy, with fewer people spending on moving vans and new couches, and as existing homeowners felt on less solid financial footing and potentially curbed their own spending. Instead, economists are predicting that prices will continue to rise — by double digits in some forecasts — through the year.“I don’t think it’s going to stop the housing market,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association.The problem is there are so few homes for sale that even a slower market is unlikely to create enough inventory to satisfy demand anytime soon. For years the United States has suffered from a chronically undersupplied housing market. Home building plunged after the Great Recession and remained at a recessionary pace long after the economy and job market had recovered. Even today, the pace of home building remains below the heights of the mid-2000s, before the 2008 financial crisis and housing market crash.This makes it a good time to be a seller — assuming you don’t need to buy. Christopher J. Waller, a governor at the Fed, is living this out.“I sold my house yesterday in St. Louis to an all-cash buyer, no inspection,” Mr. Waller said in panel discussion on Monday. “But I’m trying to buy a house in D.C., and now I’m on the other side, going: ‘This is insane.’”He noted that the sharp rise in mortgage rates over recent months should have an effect on what happens with housing.The recent lack of new building was not for lack of interest. Members of the millennial generation, now in their late 20s to early 40s, are in their prime home buying years. Their desire to buy houses and start families has collided with scant supply, leading to an increase in prices.Shutdowns in the early months of the pandemic slowed home building, but housing starts have been on an upswing lately. New home completions remain low, however, because the tight labor market and supply chain disruptions have homebuilders scrambling to find wood, dishwashers, garage doors — and workers.Inflation F.A.Q.Card 1 of 6What is inflation? More