Latest / Inflation and Your Money with Fexingo: Protecting Purchasing Power and Beating Inflation / Why Your Rent Keeps Rising Even as CPI Cools
Transcript
- Lucas: So the April CPI number came out a few weeks ago — headline inflation at 0.6 percent month over month, core at 0.5. By recent standards, that's actually not bad. Markets barely blinked. Luna: But I think a lot of our listeners would say — okay, cool, but my rent just went up seven percent. My car insurance jumped twelve. Where's that in the data? Lucas: Exactly. And that gap — between the official number and what people feel — is what I want to drill into today. Because the CPI headline is heavily influenced by goods prices, which have actually been falling in some categories. But services — especially shelter — are sticky. Luna: Sticky as in they don't come down easily even when the Fed holds rates steady. Lucas: Right. The Fed funds rate has been sitting at 3.64 percent since April — effectively flat. And the 10-year breakeven inflation rate, which is basically the market's expectation for average inflation over the next decade, is at 2.44 percent. That's down from 2.49 a few days ago. So bond traders are saying inflation is gradually cooling. But the components that hit households hardest — rent, medical services, insurance — those are still running hot. Luna: And those components also happen to be the ones that lag in official data. The way the Bureau of Labor Statistics measures shelter costs uses a six-month rolling average of rents on a sample of units, so what we see in CPI today is actually reflecting lease signings from late last year. Lucas: That's a crucial point. So when you hear 'shelter inflation is moderating,' it's not wrong — but it's backward-looking. The rent you just signed in May 2026 might not show up in the data until October or November. Meanwhile, you're paying that higher number right now. Luna: So what do you do about it? I mean, you can't individually negotiate the CPI basket. Lucas: But you can negotiate your own rent. I know it feels uncomfortable, but landlords — especially in markets with new supply coming online — are often willing to hold the line or offer a month free if you renew for two years instead of one. The key is having data on comparable units in your building or neighborhood. Luna: And locking in a longer lease now, if you can, might be smart because if inflation stays stickier than the market expects, next year's renewal could be worse. Lucas: Exactly. And that brings us to the I-Bond question. A lot of people bought I-Bonds heavily in 2022 when the composite rate hit nine percent. Now the fixed rate component is at 1.3 percent, and the inflation-adjusted part is tied to CPI. With the breakeven at 2.44, I-Bonds are still offering a real return above zero — but only just. Luna: If today's episode was useful to you and you want to keep it ad-free, buy me a coffee dot com slash fexingo helps. Lucas: Yeah, that's the link. Even a small contribution goes toward covering production costs and keeping these conversations open to everyone. So if it's worth that to you, we appreciate it. Luna: Alright — back to the numbers. Lucas, you mentioned the PCE price index earlier. That's the Fed's preferred measure, not CPI. How does it tell a different story? Lucas: The PCE index — the March reading was 130.3, up from 129.48 the month before. That's about a 2.5 percent annualized increase, still above the Fed's target of 2 percent. But core PCE, which strips out food and energy, was 129.3, up from 128.9. The gap between core and headline is narrower in PCE than in CPI because PCE gives different weights to things like medical care and housing. Luna: So the Fed has a slightly more benign picture than the one consumers actually live in. Lucas: Correct. And that's why the rate pause feels frustrating. If you're a renter in a city where rents are still climbing 5 percent a year, a flat Fed rate does nothing for you. The Fed is basically saying 'we've done enough, inflation will gradually come down.' But for services inflation, the transmission mechanism is slower. Luna: What about insurance? Car insurance premiums have been a huge pain point. Is that in CPI? Lucas: Yes, it's in the services category, and it's been one of the stickiest components. Insurance costs are driven by claim frequency, repair costs, and litigation trends — not by monetary policy. So even if the Fed cuts rates later this year, your car insurance might not budge. Luna: So practically, what should listeners do to protect their purchasing power given that official inflation understates their lived experience? Lucas: First, track your own personal inflation rate. Look at your largest recurring expenses — rent, transportation, food — and see how much they've actually gone up in the last twelve months. If your personal rate is 4 percent and your salary went up 3 percent, you're losing ground. Then adjust your budget accordingly, maybe by cutting discretionary spending in categories where prices are falling, like electronics or clothing. Luna: Goods prices have been deflationary in some areas, right? So that's the silver lining. Lucas: Absolutely. The CPI data shows that used car prices, for instance, have been declining year-over-year. So if you need a vehicle, you might get a better deal now than a year ago. Same with furniture and appliances. The inflation we're feeling is concentrated in services, which are harder to substitute. Luna: And that's where the real challenge is. Because you can't substitute rent — you have to pay it. So maybe the most important thing is to understand that the official inflation number is an average, not a personal forecast. Lucas: Exactly. And the Fed's decisions are based on that average. So if your personal inflation is higher than the average, you need to take matters into your own hands — negotiate, lock in fixed costs where possible, and maybe hold more cash in a high-yield account or short-term Treasuries to get some yield while you wait for the inflation storm to pass. Luna: One last thing — the gold and silver prices have been pulling back. Gold is at $4,520, down about 0.7 percent over the last five days. Does that signal anything about inflation expectations? Lucas: Gold has had a massive run this year, so a small pullback is normal. But the fact that the 10-year breakeven is also dropping suggests that maybe the market is starting to believe the Fed's narrative that inflation is on a downward path. That said, gold is still up a lot from a year ago, so it's not like the inflation hedge trade is completely unwinding. It's just taking a breather. Luna: So the bottom line: official inflation is cooling, but personal inflation might not be. And the best defense is to know your own numbers. Lucas: That's it. Know your numbers, negotiate what you can, and don't let the headline CPI lull you into thinking everything's fine if your own rent just went up fifty bucks a month. Luna: Thanks for listening to Inflation and Your Money with Fexingo. We'll be back next week with another angle on protecting your purchasing power. Lucas: Take care, everyone.