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CIBC: Rent and OER Inflation To Peak In M/M Terms In Early 2023

US OUTLOOK/OPINION
  • CIBC forecast CPI inflation at 0.2% M/M (5.6%, -0.4pps), a tenth below Bloomberg consensus, showing strength in core services tied to the tight labor market against an easing in core goods prices on weaker demand and the improvement in supply chains and inventories.
  • An easing in monthly hotel prices was behind the deceleration in shelter costs in Dec but rent and OER accelerated and are likely to show continued, strong pressure in Dec before peaking in early 2023 in terms of monthly increases.
  • Core services ex shelter are the main areas of concern for the Fed, given ties to labor market tightness, and still strong demand for services. A measurement quirk has driven downward pressure on core prices from medical care lately, with airfares also adding to the downside; both areas that aren’t indicative of underlying demand, and therefore did little to assuage the Fed’s concern.
  • CIBC expect there to be enough evidence in hand of a slowdown in those areas for the Fed to stop hiking after delivering another 50bps of hikes in early 2023.
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