Consumer Price Index (CPI) has a shelter component that includes both rental costs and consumption value of owner-occupied housing. Shelter makes up nearly a third of the basket of CPI inflation and 40% of the basket for core CPI that excludes the volatile food and energy components. With the increase in mortgage rates, house prices have been falling and so have the rents. The rents have dipped down to April 2022 levels after seeing substantial YOY increase. There is lag in the effect of housing data in CPI, substantial drop in inflation is expected as rent and house prices drop further.
