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US inflation increased higher than anticipated during June, further fueling economic uncertainty amidst market preparation for the possible effects of wide-ranging tariffs planned by President Donald Trump. In figures presented on Tuesday (July 15) by the Bureau of Labor Statistics (BLS), the Consumer Price Index (CPI) was up 2.7% during the last year, from May’s 2.4% year-over-year gain, fueled primarily by a climb in gasoline prices.
Economists had forecast a slightly slower 2.6% rise on a yearly basis. On a monthly scale, the CPI increased 0.3% in June, up from May’s 0.1% rise, in line with market expectations.
Core inflation, which does not count volatile energy and food prices, also inched up. Core CPI increased 2.9% over the last year, from 2.8% in May. Monthly core prices advanced 0.2%, a slight increase from the 0.1% gain the previous month. Both readings were near expectations, with annual core CPI meeting consensus, though the monthly gain was slightly less than expected 0.3%.
The inflation report arrives as the US is experiencing rising trade tensions. Trump recently imposed tariffs of 20% to 50% on imports from over 20 nations. These range from a 35% tariff on Canadian imports and a 30% tariff on imports from Mexico and the European Union. The administration also is weighing broad-based tariffs of 15% to 20% on the top trading partners. The EU is racing to negotiate and possibly retaliate.
The continued trade uncertainty has made it harder for the Federal Reserve to make any clear direction on interest rates. Markets now anticipate that the Fed will hold its present rate position at its next meeting in two weeks. The chances of a September rate cut have fallen to little more than 60% after the inflation report.
Even though June’s overall core inflation was moderate, some groups still put pressure on consumers. Services and housing, such as medical care and insurance, are still the main drivers of core inflation. The shelter index increased by 3.8% year-over-year and 0.2% for the month lower than in May yet it still accounted for the largest contribution to the month’s increase.
Rent and owners’ equivalent rent rose 0.2% and 0.3%, respectively. Lodging away from home declined sharply by 2.9%, following a continued decline from May. Cheaper airline fares, used and new cars also contributed to softening overall core inflation, though food prices were sticky, up 0.3% for the second month in a row.
