The bizarre nature of inflation in the United States

The inflation that remains in the summer of 2023 in the United States is essentially due to the rise in rents (actual and imputed to homeowners), and not to other prices. Inflation excluding energy, food and rents is effectively just 2.3% in August 2023, compared with over 10% in mid-2022. Inflation excluding energy and food and including rents is currently 4.4% in August 2023. The problem facing the Federal Reserve is therefore to reduce the rise in rents. In the United States, rents are traditionally correlated with residential real estate, with a lag of just over a year. However, residential real estate prices have been rising since February 2023, which means that we should not anticipate a sharp fall in rents. So the Federal Reserve is in trouble. If it raises interest rates further, the result will be a further fall in house sales, an increased scarcity of real estate, whether for sale or rent, and perhaps a further rise in real estate prices and rents. This difficulty would be much reduced if only actual rents were included in the price index. Inflation excluding energy and food would then be only 3%.