9.7.21
June’s Consumer Price Index (CPI) showed that core inflation rose 4.5%, the highest rise in 30 years. CoreLogic’s Chief Economist Frank Nothaft posits that the Consumer Price Index (CPI) may not be reflecting true inflation, even at this elevated level. Nothaft argues that the shelter component of the CPI, which represents 40% of core CPI and calculates the cost of shelter as rent for renter-occupied housing and as owner’s equivalent rent for owner-occupied housing, could be recalculated to incorporate a 17.2% growth in the price of a single-family home as measured by the CoreLogic Home Price Index. If recalculated, core inflation may actually be higher at 6%. This level of inflation, if sustained, “could prompt the Federal Reserve to increase interest rates sooner than it had planned.”