August CPI report shows housing prices driving up inflation: CEI analysis

Today’s Consumer Price Index report for August shows an overall inflation increase of 0.2 percent, mostly driven by rising housing prices. CEI senior economist Ryan Young provides his analysis on the report and what lawmakers can do to ease inflation.

“Two trends continued in this month’s CPI reading: food prices grew more slowly than inflation, while housing prices grew faster than inflation. In fact, 70 percent of the CPI’s increase came from rising housing prices.

“This highlights two policy trends: One, there isn’t a price gouging bogeyman in the grocery industry that election-seeking politicians must take on. Two, the need to increase housing supply is more urgent than ever.

“The federal role is limited here, but officials can ease tariffs on lumber and steel and can speed up years-long environmental reviews. State and local officials should get busy reforming zoning codes and closing veto points for NIMBYs and environmentalists who keep blocking projects. Housing prices are already moving downward in place that allow more building, such as Austin, Texas.

“As for the Federal Reserve’s big interest rate decision on September 18, the odds are now shifting in favor of a larger interest rate cut. Although the Fed’s preferred PCE inflation index does not update until September 27, it typically moves in the same direction as CPI.”