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Shelter impact on inflation

On Thursday, US #inflation for the month of july will be published. Consensus expects 3.3% YoY increment for headline CPI and 4.8% YoY growth for core CPI. As we’ve mentioned in the past, the biggest component of core cpi is shelter, also known as Owner Equivalent Rent. In the chart below you can see the difference between US apartment rent inflation and #oer. You can see how inflation was significantly higher than what was reported by #oer during ‘21 and ‘22 and now is lower, and it should drag oer down accordingly. The rest of components for headline cpi, have a more complicated task pushing the overall number down, because the easy comparisons vs the first half of ‘22 when inflation was rising, will be no longer present from now on. The question then is, will #oer decrease enough to compensate the impact of the other components, or will the base effect weigh more on the overall number and inflation will tick up?

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