Rents are falling, contrary to Consumer Price Index data

Two reports came out Thursday showing that rents nationwide declined in September from the prior month. And both datasets, from Redfin and Realtor.com, found year-over-year rent growth decelerating.

Why it matters: The slowdown in rents isn't yet showing up in the monthly inflation data. By the CPI's measure — also out Thursday — rents were up 0.8% in September.

• The difference, as Axios has written, is that the private-market data from the real estate companies covers new rental contracts only; while CPI captures rents more broadly.
• "Housing is now the most important driver of inflation," noted former U.S. Treasury Secretary Larry Summers earlier this week.

The intrigue: It could take as long as a year for the CPI data to reflect this deceleration, according to research published by the Labor Department last week and tweeted by Summers.

• The authors of the paper conclude that taking a broader measure of rents, as the CPI does, is the right way to understand price growth — but when it comes to monetary policy they're less sure.
• They seem to imply the Fed might need to watch the private market data to get a sense of where inflation is right now and react accordingly.

The bottom line: As Pantheon Macroeconomics' chief economist Ian Shepherdson said yesterday, "Evidence of falling inflation is everywhere except in the inflation data."