US Inflation Picks Up in June Amid Tariff Pressures

U.S. consumer prices accelerated in June, potentially marking the beginning of a long-anticipated, tariff-driven rise in inflation. This development has made the Federal Reserve more cautious about resuming interest rate cuts.

The Consumer Price Index (CPI) rose 0.3% in June, matching expectations and marking the largest monthly gain since January. This followed a modest 0.1% increase in May. On a year-over-year basis, CPI rose 2.7%, up from 2.4% in May, and slightly beating expectations.

Core CPI, which excludes volatile food and energy prices, rose 0.2% in June, following a 0.1% gain in May. Over the 12 months through June, core inflation rose 2.9%, accelerating from 2.8%—a rate that had held steady for the previous three months.

Between February and May, inflation readings remained subdued. This softness prompted calls from President Donald Trump for the Fed to lower borrowing costs. Economists noted that inflation had been slow to rise despite Trump’s sweeping import tariffs announced in April, largely because many businesses were still selling pre-tariff inventory.

However, with new and higher tariffs set to take effect on August 1—targeting imports from countries including Mexico, Japan, Canada, Brazil, and the European Union—the effective tariff rate is expected to increase, likely pushing prices higher through the summer.

Economists anticipate stronger goods price inflation over the coming months. Still, this could be partially offset by softer price growth in services, easing concerns over broad-based inflationary pressure. Categories such as airfares, and hotel and motel rates, have seen limited price increases due to soft consumer demand.

The Federal Reserve, which targets 2% inflation, monitors various price gauges. It is expected to keep its benchmark interest rate in the 4.25%–4.50% range at its upcoming policy meeting later this month.

Minutes from the Fed’s June 17–18 meeting, released last week, showed that only a few policymakers believed rates could be cut as early as the July 29–30 meeting, signaling ongoing caution amid mixed inflation signals.