Shelter is the largest expense for an average U.S. household and accounts for more than one-third of the consumer price index (CPI) weighting, which gives housing an outsized influence on the overall direction of inflation data. And though housing inflation has been high for months, economists say it has now peaked and we may soon begin to see a reversal. The latest CPI reading issued on Tuesday showed a monthly increase in shelter inflation from 0.4% in April to 0.6% in May, and while that means housing costs are still rising, that CPI reading is the lowest annual increase in two years, CNBC reports.
“I know this with about as high a degree of confidence as one could have,” Mark Zandi, chief economist at Moody’s Analytics, said of falling housing inflation being near at hand.
“Shelter is still playing a big role in inflation but that should be slowing in the second half of the year,” Jason Furman, an economist at Harvard University and former chair of the White House Council of Economic Advisers during the Obama administration, wrote Tuesday on Twitter.
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