Key Points
- U.S. consumer prices rose by the most in five months in June, climbing 0.3%.
- Economists believe the price hikes are the first signs of recent tariffs impacting consumers.
- The Federal Reserve is now expected to keep interest rates on hold until at least September.
- While prices for goods like furniture and appliances rose, costs for services like airfare and hotels fell, which helped to balance out overall inflation.
U.S. consumer prices rose by their largest amount in five months in June, driven by higher costs for goods. The increase suggests that recent tariffs are beginning to impact shoppers and will likely keep the Federal Reserve from cutting interest rates until at least September.
While the cost of goods is rising, softer consumer demand is keeping a lid on prices for services like airline tickets and hotel rooms. This trend is helping to prevent a widespread surge in inflation for now. Still, economists believe that the full effect of the tariffs has not yet been felt in the market.
They expect to see more significant price increases in the July and August reports, as businesses begin selling new inventory subject to the higher import duties.
President Donald Trump recently announced that new tariffs on imports from countries such as Mexico, Japan, and the European Union would take effect on August 1.
The Labor Department reported that the Consumer Price Index (CPI) rose 0.3% last month. Higher costs for gasoline, rent, coffee, and beef all contributed to the overall price increase. Prices for household furnishings increased by 1.0%, and appliances rose by 1.9%, both categories that are sensitive to tariffs. On the other hand, the price of eggs fell sharply as an avian flu outbreak eased, and used car prices also declined.
Excluding volatile food and energy costs, the core CPI rose a moderate 0.2%. The Federal Reserve, which targets a 2% inflation rate, is expected to hold its current interest rate steady at its upcoming meeting. Despite the rising prices, President Trump continued to call on the Fed to lower rates immediately.
