Let's not pretend we don't understand who will be punished here.
argued that lower-income people have been hardest hit by inflation, so they will benefit most if the Fed gets inflation under control. The argument is that items that they must buy, like food, gas, and rent, have risen most rapidly in price. Furthermore, since lower-income people tend to already be buying lower-priced brands, they have little ability to protect themselves against inflation by switching to less expensive alternatives.
There is also the issue of the distribution of unemployment. Relatively few doctors and computer scientists are likely to face unemployment as a result of the Fed’s rate hikes. The people who lose their jobs will be disproportionately retail and restaurant workers and others employed in a low-paying sector.
Starting with food, the jump in prices since the pandemic was largely a worldwide phenomenon. We saw big increases in the price of wheat and many other commodities associated with supply chain disruptions from both the pandemic and the war in Ukraine. There is a similar story with gas and energy more generally. These prices are determined on a world market. The U.S. is a major user of energy, but still only accounts for around a fifth of world demand. Reducing U.S. consumption by 2-3 percent will not have a big impact on world prices.
There is likely to be a spillover from the sale market to the rental market. Many of the houses that go unsold are likely to end up as rentals. An increased supply of rental units will put downward pressure on rents.
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