The San Francisco Fed states that: “Shelter and housing costs account for a significant portion of the basket of goods used to measure inflation in the consumer price index (CPI) and the personal consumption expenditures price index (PCEPI). Two leading indicators of future shelter and housing costs are current asking rents and current house prices.”
Well, the Zillow index for current home prices is falling – home prices are rising but at a much slower pace. Here is the chart:
Also, the Zillow index of asking rents is also falling – rents are still rising but at a much slower pace. Here is the chart.
Based on these two key leading indicators, the CPI inflation is likely to sharply fall over the next few months (there is a lag time). This supports the view that we have reached the peak in the Fed hawkishness.