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- Inflation is nonexistent with no changes to the consumer price index from one year ago. Some components are, however, making marked changes. Gasoline prices are 27 percent below one year ago, rents are rising at near 4 percent, and medical care service prices are beginning to firm up after several years of slowing inflation.
- Rents rose 3.74 percent from one year ago, its highest growth pace since September 2008. Something called owner’s equivalency rent – which is what the homeowner would hypothetically pay in rent to live in their homes – rose by 3.09 percent, essentially matching the fastest growth in just as many years. The housing shortage is leading to this upward trending phenomenon in housing costs.
- Medical service costs are beginning to rise. After having trended down from 4 percent gains few years ago to less than 2 percent early this year, it rose by 3.1 percent in October. Is this a fluke or the start of an upward trend?
- Energy and gasoline prices are much lower compared to one year ago, but this deflation will largely vanish by December/January. That means lower energy prices will not neutralize the upward pressures arising from medical fees and housing costs. Expect some inflation in 2016 as a result.
- Mortgage rates can be impacted more by inflation than by Fed policy. With inflation tame in 2015, mortgage rates have been bouncing along historic lows. But with anticipated higher inflation – probably to around 3 percent in 2016 – mortgage rates will be steadily pushed higher.
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