Consumer prices rose 0.3% in June, pushing the annual inflation rate to 2.7%, the highest since February.
Why it matters: The data suggests President Donald Trump’s tariffs are starting to impact prices for U.S. consumers, with notable increases in several tariff-exposed categories.
The details:
- Excluding gas and food, core CPI rose 0.2% from May and 2.9% over the past year.
- Prices for apparel, appliances, computers, sporting goods, tools, video equipment, and home furnishings saw significant increases in June.
- Economists warn that tariff-related price hikes could become more noticeable as businesses deplete pre-tariff inventories.
The extent and duration of the tariffs’ impact on inflation remain uncertain, but goods account for only 25% of the core CPI, requiring substantial price increases to meaningfully spike core inflation.
What they’re saying:
- “Tariffs are starting to bite,” noted Heather Long, chief economist at Navy Federal Credit Union.
- Long warned that the tariff-related impacts are in their early stages, likening it to “inning No. 1.”
President Trump seized on the inflation report to renew calls for the Federal Reserve to lower interest rates, arguing that tariffs are not exacerbating inflation.
The other side: Federal Reserve officials have maintained their current policy stance, awaiting clearer evidence of the tariffs’ impact on inflation.
What’s next: As businesses deplete pre-tariff inventories, consumers are likely to see more widespread and significant cost hikes. The Fed is expected to hold steady in its upcoming July meeting, with a potential rate cut anticipated in September.