## FAQ

### 1. What is the current inflation rate?
The inflation rate ended 2024 at 2.9%, down from 3.4% a year ago.

### 2. What are the factors contributing to the increase in inflation?
Energy prices surged in December, accounting for more than 40% of the monthly headline increase. Core inflation remained stubborn due to elevated shelter and other service costs.

### 3. How is the housing market affected by inflation?
Rising housing costs are driven by a lack of affordable supply and increasing development costs. Tight monetary policy can also hinder housing supply by increasing the cost of AD&C financing.

### 4. How is the Real Rent Index calculated?
The Real Rent Index is calculated by dividing the price index for rent by the core CPI (excluding volatile food and energy components) to indicate if inflation in rents is faster or slower than overall inflation.

## Conclusion

Inflation in December reached a five-month high, primarily driven by surging energy prices and elevated shelter costs. The housing market continues to face challenges due to a lack of affordable supply and increasing development costs. While the Fed’s interest rate cuts could help ease some pressure on the housing market, the primary solution to tame housing inflation lies in boosting housing supply. The overall economic outlook faces additional risks due to proposed tax cuts and tariffs, which could increase inflationary pressures. Balancing these factors will be crucial in navigating the path towards the Fed’s 2% target inflation rate.