The U.S. inflation rate is, of course, crucial for markets today. It’s why the U.S. Federal Reserve (Fed) hiked rates extremely aggressively in 2022. In turn, slowing inflation may cause the Fed to ease rates in 2023. The statistical details of how housing costs are calculated, make falling inflation more likely in 2023.
Housing is the largest cost in the Consumer Price Index (CPI) inflation series, with a weighting of 32.7% as of November 2022, or about a third of overall inflation series. The method of calculation for housing costs in CPI as used by the Bureau of Labor Statistics (BLS) is unique.
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