Federal Reserve officials are concerned enough about rising inflation that they are considering agressively raising interest rates, more than they have in six years. Their May 10th meeting resulted in an increase in the short-term interest rate from 4.75 percent to 5 percent, the 16th consecutive quarter-percentage-point increase in nearly two years.
Consumers expect prices to keep rising despite the growing economy and signs of slowing in the housing market. This WashingtonPost article had this to say about the increase:
Bernanke told Congress in late April that he and his colleagues might pause after 15 consecutive interest rate increases. Such a pause would be based on the Fed's forecast that the economy will slow this year as higher interest rates cause the housing market to cool, prompting consumers to ease up on spending and tamping down inflation pressures. Some Fed officials have worried about raising interest rates too high, or "overshooting," and triggering a sharper economic downturn.
They had this to say about the housing market:
Fed policymakers noted at the May meeting that the housing market had lost steam. Sales have fallen from their peaks last year, inventories of unsold homes are rising, and price appreciation is slowing. The Mortgage Bankers Association reported yesterday that mortgage applications fell last week to a level 22.4 percent lower than the corresponding week last year.
Know More about the housing market at PropertyMaven.com.
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