Core CPI is likely to come in higher for the month of September as compared to the month of August when figures are reported on October 13th.

Core CPI is likely to come in higher for the month of September as compared to August on a month-to-month and full year basis primarily due to the “Rent of Shelter” expense category which carried a 32% relative weighting for the Headline CPI figure last month and accounted for 41% of the Core CPI figure. “Rent of Shelter” is primarily comprised of “Owners’ equivalent rent of residences” which we have written about previously (see article links below). Rent-related CPI expense categories are reported with a 5 quarter lag and therefore are likely to climb higher for months. The Fed knows the Rent-related figures are a lagging indicator but our view is the Fed will use the hot Core CPI print as leverage for lifting the Fed Funds rate 75-100 BPS higher at the next FOMC meeting to be held on November 1st and 2nd.

Related TEK2day articles:

• Real Rental Data Tells A Different Story Than The Fed About Price Inflation
• CPI Housing Data Lags Real World Housing Data
• How The CPI’s Fuzzy Math Understates Inflation

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