Core CPI Ex Housing is Rolling Over

Apollo Chief Economist

Not only is housing inflation rolling over in both the Zillow and Redfin data, but core CPI ex housing has been coming down and was actually negative in October, see chart below.

A sharp slowdown in core CPI ex shelter combined with the ongoing downturn in the housing market increases the probability that inflation is coming down faster than the market is currently expecting. Which raises the likelihood that the Fed may soon be done with rate hikes.

And note again that this decline in inflation is happening while at the same time the labor market is still strong and consumers have a lot of savings, see also my note yesterday. Maybe the Fed has raised rates enough and we don’t need a lot more demand destruction to get inflation down.

The bottom line is that the likelihood of a soft landing is rising.

Chart showing housing inflation is coming down fast
Source: BLS, Haver Analytics, Apollo Chief Economist

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