Alternative BLS rental data points to major disinflation in CPI rents
As opposed to various private sector measures of spot market rents, the best leading indicator of OER & RPR is an alternative rental index produced by the BLS — it points to major disinflation ahead.
While many market participants monitor spot market rent indices from private sector companies to help gauge where the CPI’s lagging rent based indices may head, the best leading indicators are actually produced by the BLS itself — and on Wednesday, the BLS updated these datasets.
Understanding exactly what this alternative BLS rental data is telling us, is critical to understanding the outlook for inflation and Fed policy.
While the latest update of the BLS’ leading rent indices included material revisions, the conclusion drawn from the data continues to remain broadly the same — that a significant deceleration in both owners’ equivalent rent (OER) and rent of primary residence (RPR) is likely to occur this year.