Billionaire investor Bill Ackman says inflation is being underreported by the government due to soaring rent costs

Bill Ackman, CEO of Pershing Square Capital

Reuters

• Bill Ackman believes inflation is being underreported by the government due to soaring rent prices.
• Friday's CPI release showed a 6.8% increase in November, hitting its highest level since 1982.
• "The inflation that households are actually experiencing is raging and well in excess of reported gov't statistics," Ackman tweeted.

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Friday's consumer price index release by the US Bureau of Labor Statistics showed inflation jumped 6.8% in November from a year earlier, hitting its highest level since 1982.

But billionaire investor Bill Ackman thinks those figures are understated due to soaring rent prices that aren't reflected in the inputs that are used to calculate the CPI.

In a series of tweets on Friday, Ackman explained that the consumer price index relies on homeowner surveys to estimate inflation in housing costs. "This is an extremely imprecise metric," the CEO of Pershing Square Capital said, adding that he instead relies on the single-family rental market for more accurate data.

"Owners' equivalent rent in [Friday's] reported core CPI was 3.5% year-over-year. The largest owners of nationwide single family rentals are reporting 17% year-over-year rent increases," he said.

Recalculating the consumer price index with the different rent increase data would send November's reading to 10.1% from 6.8%, according to Ackman. And the trend is unlikely to slowdown due to an imbalance in the housing market.

"Housing inflation is unlikely to abate based on supply and demand trends. The inflation that households are actually experiencing is raging and well in excess of reported government statistics," Ackman said.

Soaring inflation seems to be top of mind at the Fed, which recently signaled that it may speed up the tapering of its monthly bond purchase program as the unemployment rate fell below 5%. Policymakers meet this week and will release a statement on Wednesday.

Fed Chairman Powell also testified to Congress last month that the Fed is retiring the use of the word "transitory" when describing inflation.

Apart from ending its monthly bond purchasing program, the Fed can tame inflation by raising interest rates, which many market participants will begin sometime next year. 

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