The big jump in the price of energy commodities in January was partially reversed in February with a 0.9 percent drop. This brought the overall inflation rate for the month to 0.2 percent, the same as the core rate in January. Over the last year, the overall CPI has risen by 2.2 percent, while the core rate has risen by 1.8 percent.
However, even this core rate is deceptive since rising rents continue to be an overwhelming factor. Excluding shelter, the core rate is up just 0.9 percent over the last year. There is zero evidence of any acceleration in this rate over the last year.
Housing inflation is, of course, driven primarily by a limited supply of housing. This has a different dynamic than inflation in other sectors. If the Federal Reserve raises interest rates, the near term effect is to reduce construction, possibly making the housing shortage worse and leading to higher inflation in the sector.
For more, check out the latest Prices Byte.