In other words, and in line with classical economic theory, the demand for housing has been increasing, at the same time as supply has, until very recently, been flat. Consequently, the strong recovery in house prices and upward pressure on rents are understandable looking at it purely in economic terms.
We continue to view some of the shortfall in inflation last year as likely reflecting transitory influences that we do not expect will repeat; consistent with this view, the monthly readings were a little higher toward the end of the year than in earlier months. After easing substantially during 2017, financial conditions in the United States have reversed some of that easing.