Adding to the inflation debate. We remind you that correlations come and go, they might work for decades, and sometimes they break. Also, it is very easy to find visual illusions in historical series, that doesn't mean they follow each other. We recommend running a regression study to find details on variables' relationships, however, this might still fall short on explaining why correlations run or break
Looking at U.S. home prices, we note that the latest read shows an increase of 15.8% Y/y. U.S. core inflation has followed home prices closely, and the relationship strengthen over the course of last year. Home prices are off the high prints of over 20% Y/y, since the peak, we have seen the index fall four consecutive months
If we let the S&P Case Shiller Home Price Index advance for this period of time (four months) we find that U.S. core prices could be in for some stabilization and perhaps easing back to 5.0% Y/y, last read was the September figure at 6.6%
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