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Free AccessU.S. shelter inflation could jump by nearly as much as 6% in 2023, Boston Fed economists wrote in a paper published Thursday, adding that even under optimistic assumptions of low market-rent growth CPI shelter will raise inflation considerably in the year.
The authors consider how CPI shelter would evolve under different market-rent growth rates of –1 to 3%. "We predict that CPI shelter will grow 5.24% and 5.99%, respectively, from September 2022 to September 2023 and 2.37% and 4.50%, respectively, over the subsequent 12 months," Boston Fed coauthors Christopher Cotton and John O’Shea wrote in the paper. By contrast, from 2000 through 2019, CPI shelter rose an average of 2.7% annually.
(See: MNI INTERVIEW: CPI Rent Passthrough May Be Longer - Detmeister)
"We therefore forecast that the headline CPI, core CPI, headline PCE, and core PCE will be 0.40, 0.51, 0.18, and 0.21 percentage points higher, respectively, from September 2023 to September 2024 than if CPI shelter grew at its pre-pandemic average rate," the paper reads. The Bureau of Labor Statistics reported last week shelter prices rose 0.7% in January and 7.9% on the year. Shelter makes up 34.4% of the CPI basket.
Source: Boston Fed
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