Now the inflation rate is starting to turn up, and there are warnings that the Fed may need to tighten monetary policy even if the stumbling economic recovery does not accelerate. But home prices, which had seemed to be stabilizing a year ago, are falling again.

Until 1983, the Consumer Price Index included housing costs. But then the index was changed. No longer would home prices directly affect the index. Instead, the Bureau of Labor Statistics makes a calculation of “owners’ equivalent rent,” which is based on the trend of costs to rent a home, not to buy one. The current approach, the B.L.S. says, “measures the value of shelter to owner-occupants as the amount they forgo by not renting out their homes.” The C.P.I. is not supposed to include investments, and owning a house has aspects of both investment and consumption.

Whatever the reasonableness of that approach, the practical effect of the change was to keep the housing bubble from affecting reported inflation rates in the years leading up to the peak in home prices. It is at least possible that the Federal Reserve would have acted differently had the change never been made.

The accompanying charts represent an effort to put together an alternate index of inflation, one that includes home prices rather than the owner’s equivalent rate. The effort is far from precise, in large part because the old index was based not just on purchase prices but also on changing mortgage interest rates and on changing property taxes, while this one is based solely on an index of home prices. But it nonetheless gives an approximation of what inflation would have looked like had home prices remained in the index.

The effect is particularly notable in the core index, which excludes volatile energy and food prices, and which the Fed monitors closely. In 2004, when home prices were climbing at a rate of almost 10 percent a year — more than four times the increase in rents — the core index would have been over 5 percent had home prices been included. Instead, the reported core rate was just 2.2 percent.

The Fed did raise rates in 2004, although perhaps more slowly than seems appropriate in hindsight. The increases then stunned Wall Street, which might not have happened had investors been watching an inflation rate that included home prices.

In the last few months, the two markets have again diverged, but in the opposite way. From October 2010 through January, home prices as measured by an index kept by Federal Housing Finance Agency fell at an annual rate of 12.4 percent, while the government’s calculation of owners’ equivalent rent shows it rising at an annual rate of 1.5 percent. Home prices have not yet been reported for February, but the upward trend in rental prices continued.

Inflation rates may have been understated for years when home prices were rising much more rapidly than rental rates. At the time, the discrepancy might have seemed to be an indication of rising speculation and prompted Fed concern. Now, it is possible that inflation will be overstated precisely because speculative excesses are being purged from the housing market.

Floyd Norris comments on finance and the economy in his blog at nytimes.com/norris.

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