US consumer prices experienced a modest increase in June, as the consumer price index (CPI) rose by 0.3% for the month, according to the Bureau of Labor Statistics. This puts the 12-month inflation rate at 2.7%, aligning with market expectations and marking the highest annual rate since February. Core inflation, excluding volatile food and energy prices, increased by 0.2% on the month, bringing the annual rate to 2.9%, also in line with estimates. Economists are closely watching inflation data to assess the potential impact of tariffs on the broader economy.
There were mixed signals regarding the influence of tariffs on prices. Vehicle prices declined, with new vehicles down 0.3% and used cars and trucks falling 0.7%. However, prices for tariff-sensitive apparel rose 0.4%, and household furnishings increased 1% for the month. Shelter prices also contributed to the overall CPI gain, increasing 0.2% for the month and 3.8% from a year ago. Despite the rise in prices, inflation-adjusted hourly earnings fell 0.1% in June, though real earnings increased 1% on an annual basis.
The report prompted President Donald Trump to renew his calls for the Federal Reserve to lower interest rates. He posted on Truth Social, urging the Fed to cut rates and claiming that significant savings could be achieved. The president has consistently maintained that tariffs are not contributing to inflation and has criticised the Fed’s monetary policy.
Financial markets reacted calmly to the inflation report, with stock market futures mixed and Treasury yields mostly negative. The Federal Reserve, led by Chair Jerome Powell, has so far resisted pressure to cut interest rates, choosing to observe the longer-term effects of tariffs on inflation before making any policy changes. Markets anticipate a potential rate cut of a quarter percentage point in September following the Fed’s meeting at the end of July.
