Topline
Inflation was higher last month than analysts projected, an apparent sign President Donald Trump’s tariffs have started raising prices for American consumers, as one economist said “meaningfully larger” increases are expected this year.
One economist said “meaningfully larger increases” to consumer prices are expected amid Trump’s … More
Key Facts
Consumer prices were up 2.7% last month from June 2024, and rose 0.3% between May and June, the Bureau of Labor Statistics reported Tuesday, above average analyst estimates of 2.6%, according to FactSet.
Core consumer prices, a measurement excluding the more volatile food and energy categories, rose 2.9% year-over-year and 0.2% from May to June, below analyst projections for a 3% annual increase.
What To Watch For
Whether the Federal Reserve opts to lower interest rates this year. During the Federal Open Market Committee’s meeting in June, “most” of the Fed’s staff said they believed the central bank would lower rates, while a “couple” expressed openness to cuts in July, according to minutes released earlier this month. “Most” policymakers questioned the impacts of President Donald Trump’s tariffs, however, as they said tariffs could have “more persistent effects on inflation” and cause more restrictive monetary policy. The Fed’s policy-setting committee will meet again July 30, though the implied odds they vote to ease interest rates are below 5%, according to CME’s FedWatch Tool.
Key Background
Economists have warned Trump’s wide-reaching tariffs on U.S. trade partners would likely raise prices for Americans this year. Trump has paused his “Liberation Day” tariffs until Aug. 1, after recently announcing 30% tariffs on the European Union and Mexico, among other levies. Analysts with UBS expect core CPI inflation will hit 3.9% by the end of the year, matching the latest peak set in January 2024. Inflation was mild as Trump’s tariffs took effect in April before rising again in May, when both CPI and core consumer prices increased at lower-than-expected rates. JPMorgan Chase’s chief U.S. economist, Michael Reoli, argued in a note last month that “meaningfully larger increases” to consumer prices are “likely” at some point this year, though the “precise timing and extent” of tariff impacts is “uncertain.”
Jerome Powell’s Future As Fed Chair—and Who Could Succeed Him
Trump has reportedly discussed naming Fed Chair Jerome Powell’s successor later this year, ahead of Powell’s term expiring in May 2026. Trump, who has criticized Powell for not lowering interest rates, has said he wouldn’t remove Powell from his role, but noted he “may have to force something.” National Economic Council Director Kevin Hassett told ABC News on Sunday the Trump administration’s ability to fire Powell is “being looked into,” after Russell Vought, director of the Office of Management and Budget, accused Powell last week of “grossly [mismanaging] the Fed.” Several candidates have emerged as potential successors to Powell, according to the Wall Street Journal, including Hassett, former Fed Governor Kevin Warsh, former World Bank chief David Malpass and Fed Governor Christopher Waller.