Cotality Rent Index
Shelter costs—mainly rent—make up the largest portion of both CPI and PCE, which is why the latest Cotality Rent Index is so important. Rents rose just 0.2% in July, well below the historical average of 0.7% for that month. On a year-over-year basis, rent growth slowed from 2.9% to 2.3%, a meaningful deceleration.
If these real-time rent measures (similar to Zillow’s blended rent data) were incorporated into CPI and PCE, Core CPI would be 0.5% lower, and Core PCE would be 0.3% lower. This reinforces the view that official inflation readings are overstating shelter inflation and should continue easing over time.
Minneapolis Fed President Kashkari
Neel Kashkari, who will become a voting member next year, weighed in on CNBC this morning. He expects shelter costs and other services to keep trending lower, ultimately pushing inflation back toward 2%. He noted tariffs are delaying the timeline but sees them as one-time price shocks.
Kashkari supported two additional rate cuts this year, aligning with the nine “dots” on the Fed’s dot plot. On the labor market, he described conditions as fragile, with limited hiring reported by his business contacts.
Conference Board Leading Indicators
The Conference Board’s Leading Economic Indicators fell 0.5% in August, hitting an 11-year low. Their updated forecast calls for 1.6% U.S. growth in 2025, consistent with the Fed’s projections. Slower growth should be supportive for Bonds and mortgage rates, though they are not calling for a recession at this stage.