Analysis shows us that when GDP is significantly above its potential level, inflation increases. In this situation, aggregate demand is higher than what can be comfortably produced, and the result is a rise in inflation. Similarly, when GDP is significantly below its potential level, inflation falls.
The housing services component of the PCE price index rose a bit above 0.7 percent in August, which was slightly above the previous three-month average. And I expect a similar pace to continue for a while, well into next year. Why? Shelter inflation measures the rents actually paid by households.