Inflation is about to drop hard as rents and housing prices tank, billionaire investor Barry Sternlicht says
Inflation will drop off, thanks to falling rent and housing prices, Barry Sternlicht said.
The billionaire investor pointed to falling rents, which will show up in inflation data later this year.
He warned high interest rates could overtighten the economy into a severe recession.
Inflation is about to fall off as rent and housing prices tumble, according to billionaire investor Barry Sternlicht.
"I think inflation is going to drop hard," Sternlicht said in an interview with CNBC on Tuesday, pointing to falling rent prices in recent months.
Though shelter inflation in the Consumer Price Index report jumped 8.1% year-over-year in February, more current measures of housing inflation, like rent prices, are tanking. Over the last quarter, effective rent in multifamily units dropped in 76% of housing markets, and effective rent fell about 1% nationwide, according to a recent report from Moody's Analytics.
Easing rent prices will eventually pull down shelter inflation, experts say, as real housing prices in the economy often lag behind the official statistics by around 18 months.
Sternlicht estimated that the impact of lower rents would show up mid-year, which could show major progress on the Fed's inflation fight, as housing prices account for around a third of headline CPI.
"All else being equal, inflation is going down," he added, pointing to other areas that have been impacted by falling prices, such as in food and energy.
Other market commentators have disagreed, warning that inflation is still a problem and prices could remain sticky unless the Fed keeps interest rates restrictive. Central bankers have raised rates over 1,700% in the last year to bring down high prices, which are still well-above the Fed's 2% inflation target.
But the lag in economic data means inflation is likely much lower than the Fed thinks it is, Sternlicht has previously argued, making the case that the Fed should dial back on its aggressive policy to avoid overtightening the economy into a recession.
With rates now at their highest level since 2007, he said a recession as inevitable, and predicted a severe downturn ahead for the US economy.
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