Housing rentals should slow down much more based on observed rentals. If the relationship between observed rents and the housing components of the CPI is maintained, the one-third weight that housing has in the general inflation basket and the 41.8% weight in the underlying rate will subtract about 1, 3 percentage points of headline inflation and 1.7 percentage points of underlying annual inflation rates. .
Higher borrowing costs for credit cards and auto loans, student loan repayments, and very low housing transaction numbers in an environment of weak real household disposable income will continue to dampen home spending activity. the consumers. Higher-value items such as vehicles look set to suffer continued downward pressure on prices, while slower economic growth should restrict the pricing power of companies more broadly in the economy. Federal Reserve Chairman Jerome Powell recently acknowledged that “given the rapid pace of tightening, there may still be significant tightening in the works.” This will only intensify the disinflationary pressures that are building in an economy that is showing some signs of cooling. We expect headline inflation to range between 2% and 2.5% starting in April and core CPI to reach 2% in the second quarter of 2024.