Shelter costs rose 0.6% in November, down from 0.8% the month before.
The average cost of renting a single-family home in April was nearly 14% higher than a year earlier, according to CoreLogic, a housing data company. By September, the annual increase had dropped to around 10%, partly because of softening demand.
“People are now, as a result of high rent, doubling up again, so we’re seeing an increase in the number of people moving in with roommates,” said CoreLogic economist Selma Hepp.
“There’s still some ways to go,” Hepp said, adding that she expects “very fast deceleration over the next year.”
Rents are reflected only gradually in the official inflation data, so the slowdown in housing costs is not yet fully evident in the consumer price index.
Still, Powell described the real-time reports from the rental industry as encouraging, with inflation in new leases falling.
“We would expect housing services inflation to begin falling sometime next year,” Powell said.
Wages still pose an inflation threat
The Fed chairman is less confident about the price of services, which includes everything from restaurant meals to haircuts and which is largely driven by the cost of labor.
Wages have been rising at a rapid rate, and Powell worries that could keep inflation stubbornly high.
“Despite some promising developments, we have a long way to go in restoring price stability,” he said.
Fed policymakers are meeting this week, and they’re widely expected to raise interest rates by another half percentage point, in an effort to tamp down demand and bring prices under control.
Interest rates have already risen from near zero in March to nearly 4%. Powell warned rates are likely to climb higher and stay up longer, adding that history cautions against easing up on the fight against inflation too soon.
“We will stay the course until the job is done,” he said.
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