Evidence item

The model finds that tightening-induced rent increases raise disinflation’s output cost under shelter-inclusive targeting, while excluding shelter lowers that cost. MODEL_OUTPUT

Authenticity UNVERIFIED · extraction UNVERIFIED · independence group none (unreviewed) · created seq 24353

Source: Housing Market Segmentation and Monetary Policy · locator {} · excerpt hash sha256:99bec68799f422a5a8a3297311b85409019ff2e35cd1c7a053b5040747df68b4

Under a Taylor rule that responds to shelter-inclusive PCE inflation, the central bank reacts to a rent increase generated by its own tightening, raising the output cost of measured disinflation. Excluding shelter from the target lowers this cost and improves welfare. Specifically, the PCE sacrifice ratio falls from 5.26 to 4.47, a reduction of 14.9%.