he increase in the interest rate can lower home prices, but the decline may lead to a decline in gross domestic product and inflation, according to one senior US Federal Reserve on Thursday. The estimate is that every 1% decline in GDP is associated with a decline in house prices by 4%, according to John Williams, part of the San Francisco Fed president in Jakarta. This shows the price is very expensive to use monetary policy to affect the price of the house when the purpose of the stability of the financial macro economy and contrary.
But it does not mean that Williams against the US interest rate hikes in the near future. The contrast with this, the earlier he said that he believes that the Fed should raise interest rates several times before the end of this year. If the housing sector and the overall economy is booming, the monetary policy tightening may reduce the risk to the financial system and economic activity be down from the desired level, according to Williams.
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