Interest money

On The Money — Thinking Outside the Box to Fight Inflation

With many of the forces driving inflation beyond the control of the Federal Reserve, we are looking at some supply-side solutions to rising prices. We will also look at why house prices may continue to rise and the growing odds of a recession.

But first, New York bookworms have 500,000 reasons to be happy this summer.

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Economists look beyond the Fed to fight inflation

Economists are looking beyond the Federal Reserve and thinking outside the box of monetary policy to find ways to fight inflation.

With gas prices soaring, they are largely – but not exclusively – focused on the energy industry and are increasingly coming up with ideas on how to bring prices down for consumers who cross the traditional liberal-conservative divides.

  • Maintaining consumer price stability is a key part of the Fed’s mandate, and in the months since inflation surged, most eyes have been on the central bank.
  • But experts also point to fiscal policies known as “supply-side interventions” designed to target problems in supply chains, which almost all economists see as the root cause of inflation at the moment. following the pandemic.

Tobias Burns of The Hill breaks them down here.


Why High Housing Costs Could Keep Rising

Sky-high mortgage rates and a slowdown in construction could drive up rents and home prices even further, further threatening housing affordability for millions of Americans.

Economists say that rising mortgage rates should curb soaring prices in the housing market in the short term, but it should also push up rents. New home and apartment construction is on the decline, suggesting the country’s meager housing supply won’t improve any time soon.

“It’s a perfect storm right now,” said Jerry Howard, CEO of the National Association of Home Builders. “I don’t think I’ve ever seen so many red flags at once in my entire career.”

  • The total number of housing starts fell 14.4% from April to May, hitting a 13-month low, while the construction of multi-family dwellings, including apartments, fell 23.7%.
  • Homebuilders expect this trend to continue due to rising interest rates, global supply chain issues, rising material costs, labor shortages and labor shortages. other problems.
  • Builders aren’t building many homes that first-time home buyers can afford because the current environment prevents them from making a profit on those projects.

These factors will put pressure on already rising rents, which averaged above $2,000 for the first time last month.

Karl has the details here.

Read more: Home sales give way as prices enter unprecedented territory


IRS says it’s making progress in clearing backlog of tax returns

The IRS says it is emerging from the unprecedented pile of tax returns that has piled up after the agency had to scale back operations and close facilities in 2020 following the onset of the pandemic.

The agency announced on Tuesday that by the end of this week, it will have erased all original personal income tax returns that were filed in 2021 and that did not contain any major errors.

By clearing the backlog of around 8 million returns in 2021, the agency said it had taken another step in getting back to business as usual, according to a Treasury official.

Tobias has more here.


Goldman Sachs sees higher likelihood of recession next year

Goldman Sachs economists said on Monday the likelihood of a recession next year is higher than they last predicted, as other executives warned of economic uncertainty coming.

Economists said in a note that they were raising the likelihood of there being a recession over the next year from 15% last time they weighed to 30% now.

Caroline Vakil from The Hill explains why.

Good to know

President Biden is expected to announce the appointment of Lynn Malerbathe life chief of the Mohegan Tribe, as the first Native American to serve as U.S. Treasurer.

In a statement, the Treasury Department said Malerba, who previously served on the department’s Tribal Advisory Committee, will also oversee the Office of Tribal and Native Affairs, a newly created office that will communicate directly with tribal nations and be the hub of tribal politics. .

Here’s what else we’ve got our eyes on:

  • The Russian ruble hit its highest level in seven years against the dollar on Tuesday, nearly four months after the country invaded Ukraine.
  • State treasurers, auditors and comptrollers from 21 states are urging the SEC to drop proposed rules that would require funds marketing ESG-labeled investments to disclose additional information to investors.

That’s all for today. Thanks for reading and check out The Hill’s Finances page for the latest news and coverage. Well see you tomorrow.