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Opinion
Jonathan Levin

Housing Stands in the Way of a September Fed Pivot

Slowing economic growth, cheaper commodities and bloated inventories could shift monetary policy outlook drastically. The wild card is the pace of rising home prices.

Housing is the wild card for the central bank.

Housing is the wild card for the central bank.

Photographer: David Paul Morris/Bloomberg

Federal Reserve Chair Jerome Powell sounds as committed as ever to crushing the worst inflation in 40 years. But the economy is shifting under him, and markets are increasingly attuned to the possibility that a sharp change in Fed policy — or at least tone — could come as soon as September. 

It makes sense to prepare for such an outcome. Slowing economic growth may conspire with cheaper commodities and bloated inventories to help cool inflation in the coming months. By then, the Fed should also have its policy rate at a level it considers to be restrictive, putting further downward pressure on prices.