Slow disinflation, hawkish Fed speakers
US core CPI is slowly decelerating, with the 3-month annualized YoY rate reaching ~5.2% in April, still way above the Fed’s 2% target. Shelter, one of the stickiest components, has posted a lower growth rate for the first time since since January 2021, at 8.1% in April 2023 vs a peak of 8.2% YoY in March 2023.
The Case-Shiller U.S. National Home Price Index leads Shelter inflation by 12-month and has correctly predicted the lower April rate, although the index tends to underestimate the level of Shelter Inflation (regression r-square of 46%). If this leading relationship holds, Shelter inflation should continue to cool into 2024, leading core inflation lower.