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The Federal Reserve has aggressively raised short-term interest rates to fight inflation, which in turn helps push rates higher for credit cards, auto loans and mortgages, the Associated Press reported. Rising mortgage rates have combined with already-high home prices to discourage would-be buyers. Mortgage applications have declined sharply. Sales of previously occupied homes have fallen for five straight months, during what is generally the busiest time of year in real estate. The rate on a 30-year mortgage averaged around 5.54% this week, according to mortgage-buyer Freddie Mac; a year ago it was close to 2.78%. The increase in rates is leaving buyers with some unwelcome options: pay hundreds of dollars more for a mortgage, buy a smaller home or choose to live in a less desirable neighborhood, or drop out of the market, at least until rates come down. All signals point toward the Fed continuing to raise interest rates, promising little relief for potential buyers at least for the rest of the year.

U.S. consumer prices surged 9.1% in June, the largest annual increase in more than four decades amid stubbornly high costs for gasoline, food and rent, cementing the case for another 75-basis-point interest rate hike by the Federal Reserve this month, Reuters reported. The larger-than-expected increase in the year-on-year consumer price index reported by the Labor Department on Wednesday also reflected higher prices for healthcare, motor vehicles, apparel as well as household furniture. The CPI increased by the most in nearly 17 years on a monthly basis. The inflation data followed on the heels of stronger-than-expected job growth in June and suggested that the Fed's aggressive monetary policy stance had made little progress so far in cooling domestic demand and bringing inflation down to its 2% target. Though a global problem, high inflation is a political risk for U.S. President Joe Biden and his Democratic Party heading into congressional elections in November. "Despite the Fed's best intentions, the economy looks to be moving into a higher inflation regime," said Christopher Rupkey, chief economist at FWDBONDS in New York. "The Fed is even further behind the curve after today's sizzling report." The consumer price index increased 1.3% last month, the biggest monthly gain since September 2005, after advancing 1.0% in May. A 7.5% surge in energy prices accounted for nearly half of the increase in the CPI. Gasoline prices jumped 11.2% after rebounding by 4.1% in May. Natural gas prices rose 8.2%, the most since October 2005, while the cost of electricity increased 1.7%. Food prices gained 1.0%. The cost of food consumed at home rose 1.0%, posting the sixth straight monthly increase of at least 1.0%.

Rents have been rising swiftly across America for much of the pandemic era, and housing experts are warning that they could now receive a boost from an unlikely source: the Federal Reserve, the New York Times reported. As the central bank raises interest rates to cool down the economy and contain rapid inflation, it is also pushing up mortgage costs, putting home purchases out of reach for many first-time buyers. If people who would have otherwise bought a home remain waylaid in apartments and rented houses, it could compound already-booming demand — keeping pressure on rental prices. While it is tough to predict how big or how lasting that Fed-induced bump in rental demand might prove, it could ironically make it more difficult for the central bank to wrestle inflation lower in the near term. Rent-related costs make up nearly a third of the closely tracked Consumer Price Index inflation measure, so anything that helps to keep them climbing at an unusually brisk pace is likely to perpetuate rapid inflation. Rents on new leases climbed by 14.1 percent in the year through June, according to Apartment List, an apartment listing service. While that is slightly less than the 17.5 percent increase over the course of 2021, it is still an unusually rapid pace of growth. Before the pandemic, a 2 to 3 percent pace of annual increase was normal. The recent quick market rent increases have been slowly spilling over to official inflation data, which track both new and existing leases.

Millions of Americans will now see a cleaner bill of health on their credit reports, making it easier for many to get an apartment or apply for a loan, the Wall Street Journal reported. Effective July 1, the three major credit reporting bureaus have removed medical debts that went into collection but were subsequently paid. In the past, these types of debts would remain on reports for as long as seven years. More changes are coming too. Beginning next year, credit reports will also be stripped of all unpaid medical debts up to $500. The two changes combined should scrub 70% of the approximately $88 billion in medical debt that currently shows up on the credit reports of 43 million Americans, according to the Consumer Financial Protection Bureau. Removing these blemishes should help some people when getting credit checks by landlords, employers, or when applying for loans, consumer advocates said. Some people could see a modest boost to their credit score, and others will benefit merely from having traces of the past debts deleted. Equifax, Experian PLC and TransUnion, the biggest credit-reporting firms, announced these changes to reporting practices in March, a month after a report from the CFPB suggested it would look into “whether policies should be implemented to eliminate unpaid medical billing data on credit reports altogether.” Though unpaid medical bills account for 58% of all debt in third-party collection, according to the CFPB, the agency’s research has found it isn’t a very good predictor of overall creditworthiness. FICO, which powers the most widely used credit scores, also found that paid medical collections are even less predictive of a person’s ability to repay than unpaid medical collections. (Subscription required.)