Rising Rents Threaten to Prop Up Inflation

rising rents threaten to prop up inflation

Sumary of Rising Rents Threaten to Prop Up Inflation:

  • If rents continue to take off, it could be bad news both for those seeking housing and for the nation’s inflation outlook.
  • Rental costs play an outsize role in the Consumer Price Index, so a meaningful rise in them could help keep that closely watched government price gauge, which has picked up sharply, higher for longer.
  • Rents are only about half as important to the Federal Reserve’s preferred Personal Consumption Expenditures inflation index, but a long bout of high C.
  • inflation may influence consumers’ expectations for future price gains, which could in turn quicken them.
  • Consumer prices jumped a rapid 5.4 percent in the year through June, but much of the increase was tied back to the economy’s reopening from the pandemic.
  • Policymakers at the Fed and White House have maintained that today’s strong price pressures should fade as the economy gets back to normal, as one-off problems pushing up used car prices are resolved and as a spike in demand that’s elevating furniture and washing machine costs begins to abate.
  • Measures of rent and what’s called “owners’ equivalent rent” — which uses rental data to try to put a price on how much owners would pay for their housing if they hadn’t bought a home — make up nearly one-third of the Consumer Price Index.
  • ”He and other economists said it was too early to tell to what extent, and for how long, rents would prop up overall prices.

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