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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory
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To: CalculatedRisk who wrote (27359)2/28/2005 2:11:28 PM
From: John Vosilla  Read Replies (2) of 110194
 
Last year, the Fed acknowledged that CPI was probably somewhat understating inflation because of the rent calculation ... and interestingly, that if interest rates rose, CPI would go up at first as rents rose in relation to housing prices.

Bingo. High interest rates coupled with tight credit creates greater demand for renting versus owning and thus pumps up the CPI and further fuels the rise in long term rates.
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