While previewing this week’s US inflation update, I wrote that if you’re in the camp hoping for an upsized rate cut from the Fed on September 18, “you really need a constructive read” on the shelter component.

Alas, the shelter gauge in the BLS report posted the largest MoM gain since January, a disconcerting 0.52% advance.

As the figure below shows, that’s a meaningful uptick and it was, to quote the BLS, the “main factor” in driving a 0.2% increase on the all-items, headline index.

That’s unhelpful, to put it politely. It’ll be downplayed, rightly or wrongly, by those of a dovish persuasion, but whether you believe the BLS’s metrics paint a timely, accurate picture of shelter costs in America, there’s no question that the country’s experiencing an acute housing affordability crisis. The overshoot on the shelter gauge just underscores the point.

OER posted a 0.49% MoM advance and the primary rent series rose 0.37%. That’s a mirror image of July’s release, when OER rose 0.36% and the rent series 0.49%. For context, OER really shouldn’t be running any higher than, say, 0.25%-0.30%, which is to say we’re still pacing ~double the rate that’d be considered acceptable by economists.

You might contend the persistence of shelter inflation actually argues for Fed cuts — large ones, even. After all, elevated mortgage rates are the main factor constraining resale supply and it’s that dearth of inventory which is propping up existing home prices. If you cut rates, you loosen the “golden handcuffs,” and as more supply comes onto the market, price pressures will abate. In addition, builders grappling with margin pressure will get some relief and will thus be incentivized to deliver more housing, both single- and multi-family (although I should note that new construction inventory is, ostensibly anyway, ample for single-family homes).

The opposing argument just says that’s all bullsh-t. That lowering rates will have precisely the effect you’d think lowering rates would have, namely driving an increase in demand for inventory that’ll still be scarce given that 10-year yields would need to fall another ~150-200bps to push rates down near the average rate on the nation’s mortgage stock. More demand for still-constrained supply will lead to even higher prices.

Pick a side. At this point, I don’t care which side you take. I’ve argued both at various intervals.

Panning out to the aggregates in Wednesday’s release, core price growth was 0.28%, the quickest since April and above consensus.

On a YoY basis, 3.19% was (basically) unchanged, in-line with expectations. The headline index rose 0.2% from July and 2.5% YoY.

Outside of shelter and airfares, the underlying indexes were generally benign. Grocery prices were flat again and rose less than 1% from August of last year. The energy indexes posted declines pretty much across the board. And used vehicle prices continued to fall.

Measured on a three-month annualized basis, core CPI ran 2.1% last month. The CPI-derived “supercore” measures (i.e., core services stripping out shelter and stripping out the OER and rent gauges) printed 0.24% and 0.33%, respectively. Both were brisker than July’s MoM readings.

All in all, the update wasn’t anything to panic about, but the odds of a 50bps move from the Fed next week are now negligible. Goodbye 50. We hardly knew ye.