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US consumer prices pise as expected in june amid tariff pressures

14:43

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U.S. consumer prices saw a notable increase in June, likely marking the beginning of a long-anticipated rise in inflation, driven by new tariffs. This uptick has kept the Federal Reserve cautious about making further interest rate cuts.

The Consumer Price Index (CPI) rose by 0.3% in June after a smaller increase of 0.1% in May, according to data from the Bureau of Labor Statistics. This represents the largest monthly increase since January. Over the year through June, the CPI advanced by 2.7%, compared to a 2.4% rise in May.

Economists surveyed by Reuters had predicted the CPI would climb by 0.3% month-over-month and increase by 2.6% year-over-year.

For months, inflation remained relatively low, leading to calls from President Donald Trump for the Federal Reserve to lower interest rates. However, economists note that inflation has been slow to react to the sweeping import tariffs announced by Trump in April, as businesses were still selling off stockpiled goods accumulated before the tariffs took effect.

Last week, Trump announced new tariffs set to begin on August 1 for imports from several countries, including Mexico, Japan, Canada, Brazil, and the European Union. Economists expect that higher prices for goods will continue into the summer.

Excluding the more volatile components of food and energy, the CPI rose by 0.2% in June, up from 0.1% in May. Over the year, core CPI inflation rose by 2.9%, slightly above the 2.8% increase seen for three consecutive months prior.

Economists believe that price hikes for goods will likely be somewhat counterbalanced by modest increases in services costs, which could alleviate concerns of widespread inflationary pressure. Services-related categories, such as airfares and hotel room rates, have seen more moderate price rises due to softer demand.

The Federal Reserve tracks various inflation measures as it works towards its 2% inflation target. The central bank is expected to leave its benchmark interest rate between 4.25% and 4.50% at its upcoming policy meeting later this month. The minutes of the Fed’s June meeting, released last week, indicated that only a few officials thought that rate cuts could begin as soon as the July 29-30 meeting.

With rising tariffs expected to impact consumer electronics, autos, and apparel, Goldman Sachs forecasts monthly core CPI increases of 0.3%-0.4% over the next few months, although they expect limited impact on core services inflation.