Asset prices (house prices, stocks, etc. ) are not calculated into inflation, nor they should be. Only rents, and costs of maintaining houses are a part general level of prices for goods and services.
Houses used to be included few decades ago in inflation calculation - this sounds more like trying to hide how much price increases.
Similar things happen in taxation. In EU in many countries you have Brutto salaries that includes employee contribution for healthcare, but most people don’t know that employer on top of that pays also another half.
So when people calculate their after tax salary they thing that only 35% is tax when in real life it’s 45%. Include VAT, duty tax, excise and easily you pay 60% taxes.
If politicians would make this clear with just one single 60% tax most people would be furious and go to street - that’s why they are using this salami strategy.
The cost of houses (the durable structure sitting on land) is not.
Those are not investment assets. They deprecate towards zero.
The CPI is not supposed to include investments, and owning a house has aspects of both investment and consumption.
Until 1983, the CPI included housing costs, but it was changed because it screws up what is measured. The current method is better. The current measure takes into account owners’ equivalent rent. It's based on the trend of costs to rent a home, not to buy one.
From recent examples when Covid started everyone was “investing” in hand sanitizers, masks, gloves - it was crazy expensive and so short in supplies that even pharmacies couldn’t get it from wholesellers - scalpers instead where making a killing .
But you cannot just ramp up house production that fast.
Which isn't to say I disagree with you, policy should favor direct housing affordability over things like price appreciation and subsidizing ownership.
I wonder if there's a sensible way to limit how much leverage Fanny and Freddie will back, maybe by shortening the maximum allowed term of mortgages as interest rates fall below some specified point. Not sure you can do that in a way that avoids a cliff though.
Anyone who owned equities or houses before the interest rate move is set for life, anyone who didn't lost basically all of their savings.
It's interesting how many people try to explain away this with Fed-speak and pretend it doesn't matter.
Nobody becomes richer or poorer when nominal value of currency changes.
btw. Central banks interest rate can go negative only little until it becomes cheaper to hold money assets or transfer them to other assets. Nobody holds cash if interest rate is -5%. This is why deflationary spiral can't be countered with just going below zero.
Since most goods and services flow through the largest publicly listed companies, I consider equity market indexes like VTI or VOO to be a better gauge of inflation over the course of decades. It has been my experience that the prices I pay for things like land, daycare, education, healthcare, and even services like electricians/plumbers/other specialized labor follows the increase in equity markets, at least in my high cost of living area.
Also, the government will backstop equity prices by reducing the purchasing power of the currency, so that also tells me equity prices are tracking purchasing power.
> I am not understanding the reasoning. .... I consider equity market indexes like VTI or VOO to be a better gauge of inflation
Ask yourself: What use would be an inflation measure that takes into account asset valuation?
https://www.bls.gov/cpi/factsheets/owners-equivalent-rent-an....