Key inflation gauge rises 3.6% from a year ago to tie biggest jump since the early 1990s

• • An inflation measure the Federal Reserve uses to set policy rose 3.6% in July from a year ago, meeting Wall Street expectations but also tying the highest level in about 30 years.
  • The core personal consumption expenditures price index was unchanged from June, which was revised up one-tenth of a percentage point, the Commerce Department reported Friday

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US rent hikes will explode consumer inflation in 2022

“…How come the shelter component of the US Consumer Price Index is rising at just 2% a year while all the private-sector gauges of rent inflation show rent hikes of close to 10%?

Shown in the Chart of the Day is a comparison of the Zillow Rent Index with the Consumer Price Index rent component. Shelter is two-fifths of the total index, so the question of whether inflation is “transitory” or not depends on rents.

This question has a simple answer: It takes the Bureau of Labor Statistics about a year to catch up with rent inflation. What the government reported as rent inflation in July reflects the economy of a year ago and more.

That’s because renters’ leases take a year or two to expire. The Zillow, Apartmentlist.com and CoreLogic reports reflect the average rent on a new lease, not the rent on leases signed in the past. As old leases expire and renters have to pay the higher market rate, rent inflation will surge.

The Fed can continue its Groucho Marx impression (“Who are you going to believe –me, or your own eyes?”) only until the inflation now in the pipeline shows up in the official numbers. Perhaps America’s monetary officials will find themselves at Dulles Airport this time next year surrounded by murderous mobs of renters waiting for rescue flights to Davos.

But the blame for all this will land on the desk of beleaguered President Biden, who has to answer to Americans who have seen their real incomes eroded by inflation during every one of the past twelve months…”