At the conclusion of its January policy meeting, the Federal Open Market Committee strongly signaled that it will undertake its first, post-Covid increase of the federal funds rate in March. The Fed is tightening monetary policy in response to the highest inflation readings in nearly 40 years. These inflationary pressures have increased both consumer costs and businesses input costs, including those faced by the residential construction sector.
The Jan. 26 policy announcement noted clearly: “With inflation well above 2% and a strong labor market, the Committee expects it will soon be appropriate to raise the target range for the federal funds rate.”
NAHB Chief Economist Robert Dietz provides in-depth analysis on what the Fed action will mean for housing and interest rates this year in this Eye on Housing blog post.