No Shelter from High CPI

CPI was up 8.3% and core CPI was up over 6%. The issue for CPI now is Rents. I discussed this a few months ago: There is a lag between the 14% increase in rents and them showing up in CPI. Well, here they come.

This graph shows you the year over year change in owners’ equivalent rents in CPI.

With inflation in rents running at 5% and rents making up 40% of core CPI, that’s 2% core CPI EVEN IF NOTHING ELSE INCREASES IN PRICE.

I expect inflation will peak soon, but if it says at 4-5% the Fed will still be aggressive. Rents is going to make their job hard since it still will likely increase from here.