Will Lagging Inflation Numbers Inflame the Fed?

The recent CPI report showed a nominal decrease in inflation compared to last year, but its 0.5% monthly increase is a sign that the inflation cooldown is going to be a bumpy ride. While those following the apartment market are familiar with the roughly 1-year lag between market rent growth and CPI-measured rent growth, it is worth noting that the still-high rent growth numbers in the CPI are expected to come down considerably in the next few months. It remains to be seen whether the Federal Reserve will respond to these CPI numbers and the recent strong job growth figures with more aggressive rate hikes, but equally important is the question of how long these rates will stay high. The last time that the federal funds rate was this high (2006-2007), a full year elapsed before they were reduced, and multifamily investors—both buyers and sellers—may need to adjust their perspective to account for an era (hopefully no longer than 1 year) of higher rates.