Everyday Economics: Macro backdrop matters for housing

Last week’s inflation report showed the first clear signs that the conflict with Iran is feeding into the U.S. economy through energy prices. Consumer prices rose 3.3% in March from a year earlier, up from 2.4% in February. Core inflation was firmer too, rising 2.6% over the year. The big story, though, was energy. The gasoline index surged 21.2% in March alone and accounted for nearly three-quarters of the monthly increase in headline CPI. That is not the kind of inflation shock the Federal Reserve can easily fix. Higher interest rates do not produce more oil. But they can weaken demand further, and that is a problem when the labor market is already losing momentum. That is why the inflation shock matters even if it eventually proves temporary. A one-time jump in the price level still erodes purchasing power. Households pay more at the pump, shipping costs rise, firms face margin pressure, and some of those costs begin to show up outside the energy sector. The result is a Fed that is