Federal Reserve Board Governor Adriana D. Kugler delivered a speech on US housing affordability and the economic outlook, arguing that both shelter and homeownership costs remain elevated and that inflation faces renewed upside risk from trade and tariff policies. Against that backdrop, she judged it appropriate to keep the policy rate at its current level for some time to help keep longer-run inflation expectations anchored. On housing, she noted that rent inflation has cooled as multifamily construction increased, but that affordability pressures persist and lower-end rental inflation has not cooled as much because new supply has been concentrated at the high end. Rent growth eased to 3.8 percent over the 12 months ending in May from 8.3 percent over the 12 months ending in December 2022, while around 40 percent of renters spent more than 30 percent of income on rent in 2023, with higher shares for Hispanic households (43 percent), Black households (47 percent), and households headed by someone who did not attend college (46 percent). For homeownership, she pointed to high house prices relative to income, mortgage rates between 6 and 7.5 percent in recent years, and rising property taxes and insurance, citing Board staff research that ownership costs relative to median income in 2023 were the highest since 1980. She attributed persistent price pressures in part to supply constraints, including local regulation, higher real construction costs (about 25 percent since the mid-2000s), tariff-related increases in builder costs (estimated at about 3 percent of the average new-home price), and reduced existing-home listings linked to mortgage “rate lock-in.” On the macro outlook, she described the labor market as stable, citing 147,000 jobs added in June and a historically low unemployment rate, but saw inflation reaccelerating, with headline personal consumption expenditures inflation estimated at 2.5 percent year on year in June and core inflation at about 2.8 percent, and “no progress” over the past six months. She argued that core goods inflation is already partly reflecting tariff pass-through and may rise further as inventory dynamics and price-setting behavior delay adjustment, while additional tariff changes and geopolitical risks could add to inflation pressures later in the year.

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