Gas is $2.50/gallon here and trending lower. Energy prices impact the entire supply chain which helps prices of pretty much everything we buy and helps spur growth. However, now that we are net exporters of oil/gas we also take a hit from lower oil/gas prices.
More impactful for inflation will be housing. It makes up 1/3rd of the inflation calculation and was a major contributor to the high inflation of the last five years. Real estate prices have largely peaked and well off highs in many areas with inventory for sale at the highest levels in five years. Interest rates can go either way IMO. At this point if rates go up prices likely go down as affordability seems to have met an inflection point. If rates go down, you start to unlock mobility as people with lower rate mortgages can "trade" up or down versus being currently stuck with their 3%-4% mortgages anchoring them in place. Don't forget we are deporting people, reducing housing demand that has been inflated for the last four years by open borders. Overall, housing likely deflationary over the next 12-24 months and at "worst" flat. All of these influences apply to rents too, vacancies are up which means incentives to move and slower/no rent increases on renewals.
Lower energy and lower/flat housing costs are more than making up for TEMU and Walmart raising prices due to tariffs. If 1/3 applied to housing drops 1%, everything else needs to be up 4.5% to average out to the 2% bogey.
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