NPR. This is the indicator from Planet Money, I'm Teriam Woods.

And I'm Whelan Wong.

So there are these basic economic principles that you have heard many times on this very show. Here's one. When inflation is high, the

Federal Reserve raises interest rates to cool down the economy and get prices

under control. Yeah, I think I started to mumble about this in my sleeve like tossing and turning, muttering 2%

inflation target, your own pal, rate hikes.

But there is one part of the economy, a really important part, that is upending what we know

about how the Fed brings down inflation.

We're talking about the housing market and what economists call shelter inflation.

That's a component of the Consumer Price Index that includes rents.

Yeah, the housing market is posing this huge challenge for the Fed right now,

because it turns out that the Fed's main tool for

bringing down inflation, higher interest rates, may actually lead to higher home

prices and rents. High interest rates leading to higher prices.

It's like we've entered some kind of fun house economy, although I don't think the Fed would

describe the situation as fun, because with shelter inflation staying high that potentially delays the Fed

getting to its 2% target which means they have to keep interest rates high.

The Federal Reserve decided today to keep rates unchanged and

signaled that they could come down as soon as September.

Today on the show we explain this housing market conundrum and how it shows the limits

of the Fed's power when it comes to a part of the economy that affects basically every American.

We'll also look at how one community is taking matters into its own hands when it comes to housing affordability.

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