Rents Are Rising

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RE The rent is getting steep and gas prices are climbing again. But broad price inflation is still tame, and is unlikely to squeeze consumers or upend financial markets any time soon. 

That’s the take by Bank of America Merrill Lynch senior U.S. economist Michael Hanson, who points out in the attached video that while “core” inflation is “firming, it is still at very low levels.” 

Gains in shelter costs, including rents, led the core measure of consumer prices – which excludes food and energy products – to a 0.3% increase in April, slightly above forecasts. That lifted the annual gain in the core Consumer Price Index to 1.8%. Overall CPI arrived as expected at 0.1%. 

Hanson points out that the 0.3% rise in core CPI even overstated the move, as it was rounded up from slightly more than 0.25%. 

He also notes that CPI is registering more price gains than alternate measures of inflation such as import prices, producer prices or the core personal consumption expenditures price gauge. The latter number is preferred by the Federal Reserve and is the one the Fed wants to see rise toward its 2% long-term target to set the stage for its first rate increase since 2006. 

Fed Chair Janet Yellen has said that inflation doesn’t need to get above 2% before the Fed tightens, but that policy makers must be reasonably confident inflation is headed there prior to a “liftoff” in rates. 

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