Core inflation cools for a third month, and the composition is what matters
The headline fell to 2.9 percent. Underneath it, the shelter component finally started behaving like the private rent data said it would.
Core consumer prices rose 0.2 percent on the month and 2.9 percent on the year, the third consecutive monthly deceleration and the first time the annual rate has started with a two since early in the cycle.
The composition is more interesting than the level. Shelter, which is roughly a third of the core basket and has been the single largest source of stickiness, rose 0.26 percent. That is the slowest reading in over two years and it is finally consistent with what private rent trackers have been showing for the better part of eighteen months.
Why shelter lags, and why that lag matters
The shelter component is built from a survey that samples each unit roughly every six months and includes existing leases, most of which were signed at rates agreed a year or more ago. New-lease data therefore leads the official series by about twelve months.
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