Weekly Real Estate News
Inflation concerns are broadening across the Federal Reserve after two regional Fed presidents backed last week’s interest-rate increase and emphasized that price pressures remain a greater risk to the economy than weakening employment.
Richmond Federal Reserve President Tom Barkin said Tuesday that inflation risks now outweigh risks to maximum employment, offering a detailed defense of the Federal Open Market Committee’s decision last week to raise its benchmark rate by 25 basis points.
“The risks to inflation outweigh the risks to maximum employment. That’s why we raised rates,” Barkin said in prepared remarks to CFA Society Baltimore.
The Sept. 16 increase lifted the federal funds target range to 3.75% to 4.00%. The FOMC approved the move unanimously, according to the Federal Reserve. It was the central bank’s first policy move since cutting rates in December 2025 and its first rate increase since mid-2023.
Barkin says inflation remains the bigger risk
Barkin pointed to July headline PCE inflation of 3.7% and core PCE inflation of 3.3%, both well above the Fed’s 2% objective. More than 60% of the PCE index was rising faster than 3% year over year, he said.
At the same time, Barkin described the labor market and broader economy as remaining on solid footing. August unemployment was 4.1%, while consumer spending remained resilient and investment continued to expand.
“Economic conditions are, if anything, firming,” Barkin said, citing reports from businesses in the Richmond Fed district.
That combination — persistent inflation and continued economic resilience — is central to the Fed’s current policy debate. Barkin said inflationary shocks that some had expected to fade quickly have instead persisted, pointing to tariffs, the Middle East conflict and pressures associated with the artificial-intelligence investment boom.
He stopped short of committing to another increase. Asked whether additional rate hikes will be required, Barkin said the answer will depend on incoming conditions.
Collins also backs more restrictive policy
Boston Federal Reserve President Susan Collins separately said Tuesday that she supported last week’s increase because of the risk that inflation remains notably above the Fed’s 2% target.
Collins said a “somewhat more restrictive” federal funds rate would help bring inflation sustainably back to target, according to Reuters.
Her comments add another voice to the group of Fed policymakers emphasizing inflation risks after last week’s increase, but Collins did not explicitly call for another rate hike at the Fed’s next meeting.
What the Fed debate means for housing
The policy shift matters for housing because expectations for the federal funds rate influence Treasury yields and the broader interest-rate environment that helps determine mortgage borrowing costs.
The Fed does not directly set mortgage rates, and mortgage rates can move independently of individual Fed decisions. But persistent inflation and expectations for tighter monetary policy can keep upward pressure on longer-term yields and make a sustained decline in mortgage rates more difficult.
For homebuyers, builders and mortgage lenders, the question now is whether September’s increase proves sufficient to slow inflation or whether policymakers conclude that additional tightening is necessary.
Barkin explicitly left both possibilities open. Inflation could retreat as recent shocks reverse and demand slows, he said, or price pressures could remain stubborn enough to require further action.
The next phase of the Fed’s policy debate will therefore depend heavily on incoming inflation, employment and economic-growth data.
Sources: Federal Reserve Bank of Richmond; Federal Reserve Board; Reuters.
Photo: Vihan Dalal/Unsplash.
