US inflation ticked up in June in a possible sign that President Trump’s tariffs are starting to sting.
The Consumer Price Index rose 2.7% in June from the year before, matching economists’ expectations but coming in above the previous month’s 2.4% reading, the Bureau of Labor Statistics said Tuesday.
Core CPI, which excludes volatile food and energy prices, gained 2.9% from a year earlier, above the previous month.
On a month-to-month basis, headline inflation rose 0.3%, in line with forecasts but above the previous month’s 0.1% jump.
“While it’s a relief to see Tuesday’s CPI in-line with expectations, it still showed that inflation was hotter in June than it was in May,” Skyler Weinand, chief investment officer at Regan Capital, said in a note Tuesday.
“We are now even further from the Fed’s 2% target, which means the Fed is in no position to cut interest rates until at least September.”
Trump has put Chair Jerome Powell on blast for not slashing interest rates, and a growing number of officials have joined in the call for a rate cut as soon as July.
But policymakers are still widely expected to stick to the target 4.25% to 4.5% range after their meeting later this month, according to CME FedWatch, which tracks Fed Funds futures prices.
Consumer prices, prior to June’s reading, had mostly been trending downward since January, shrugging off fears that tariffs could reheat inflation and slow economic growth.
The indexes for used cars and trucks and new vehicles saw some of the most substantial declines in June, according to the Bureau of Labor Statistics.
That came as a surprise for economists, who were calling for upticks in the auto prices— one of the sectors that is hardest hit by tariffs.
Apparel prices, however, are also heavily influenced by tariffs, and jumped 0.4% in June.
Household furnishings, another tariff-sensitive sector, rose 1%.
Shelter prices ticked up just 0.2%, but they were the main contributor to the month’s overall increase, according to the Bureau of Labor Statistics. The index rose 3.8% from the year before.
Food prices rose 0.3% for the month with gains in both food at home and dining out. The sector rose 3% from a year earlier.
Energy prices, meanwhile, reversed a 1% decline from the month before, rising 0.9% in June. The sector is still down from the year before.
Medical care services grew 0.6% and transportation services inched up 0.2%.
Airline fares fell 0.1% in June. It was one of the main sectors to fall last month as persistent economic uncertainty around Trump’s trade war and geopolitical tensions fueled a dip in travel demand.
Analysts have cautioned that it will take time for tariffs to fully work their way through the economy – which could mean a longer “wait-and-see” approach from the Fed.
“If it’s true that inflation is staying in check, then the Fed can go ahead and cut interest rates – potentially as early as September – but if subsequent reports show a different story, then the Fed is going to have to stay on hold even longer,” Chris Zaccarelli, chief investment officer at Northlight Asset Management, said in a note Tuesday.
