US Housing: The Best Disinflation Trade?

One of the biggest challenges central banks now face is trying to meet inflation targets in a world plagued with weak growth, falling commodity prices and an ageing population, which appears reluctant to spend. This is reflected in government bond yields around the world that are touching multi-decade lows as a consequence of global deflationary forces and unorthodox monetary policy in Europe and Japan. Fears that the US and the UK may also adopt unorthodox monetary policies to stimulate growth haven’t helped sentiment.

That being said, US inflation data released today showed an improving picture for the world’s most important economy. The consumer price index rose in June for the fourth straight month, as the effects of low energy prices and...