Housing costs: a final hurdle in the last mile of disinflation?

Key takeaways

• Inflation receded from recent peaks, but housing cost growth remains elevated. This strength reflects pandemic-induced changes in housing supply and demand which further aggravated existing pressures from long-standing housing shortages and demographic trends.
• Strong growth of the housing component of inflation can be a concern for monetary policy because it tends to be more persistent than components related to other  services and goods, reflecting lags in measurement and infrequent changes in rents.
• In the short term, rents and housing costs may rise after a monetary policy tightening if landlords pass higher financing costs to tenants, property developers reduce new supply or more households opt to rent rather than buy.

The views expressed in this publication are those of the authors and not necessarily those of the BIS.