Some of the highest mortgage rates in 14 years are beginning to stall the once red-hot housing market. That’s bad news for buyers and sellers – including me – but to the Federal Reserve, it’s a sign of progress.

The Fed is in the midst of an unprecedented series of interest rate hikes – with the next planned for Wednesday – to fight soaring consumer prices. And the housing market is a key indicator because it’s the part of the economy most affected by changes to borrowing costs, explains Mark Flannery, a finance scholar at the University of Florida. The Fed’s goal: subdue inflation without inducing a recession.

So what does housing tell us about whether the Fed is managing to tame inflation? Flannery’s son, who has been hunting for a larger home for his family, provides a clue.

Also today:

Bryan Keogh

Deputy Managing Editor

Home sales are slowing as the Fed hikes rates. AP Photo/John Raoux

Dispirited homebuyers show why Fed’s unprecedented fight against inflation is beginning to succeed

Mark Flannery, University of Florida

Because housing is sensitive to changes in borrowing costs, it can tell policymakers and consumers a lot about whether the Fed’s plan is working.

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