Housing’s contribution to core PCE fell to just 0.3 percentage points above pre-pandemic levels by March 2025, down from 0.5 a year earlier. Shelter inflation had exceeded 5% year-over-year in early 2024 before declining to 3.2% by July 2026. The overall core PCE rate now stands at 3.34%, but core services excluding housing remain at 3.8% annually, still well above the Fed’s 2% target. Nick Timiraos, chief economics correspondent at the Wall Street Journal, notes that housing is no longer the primary obstacle to the Fed’s goal, though healthcare costs, insurance premiums, and financial services continue to exert independent inflationary pressure.
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