Inflation surges in US at 2.7% rate as investors brace for impact of Trump’s tariff tornado

Inflation in the US went up in June amid confusion and uncertainty over President Trump’s tariffs, according to fresh government data released Tuesday (July 15).

The Bureau of Labor Statistics reported that the Consumer Price Index (CPI) climbed 2.7 per cent year-over-year in June, up from May’s 2.4 per cent rise, fuelled by a rebound in gas prices.

Economists had predicted a slightly lower annual increase of 2.6 per cent. On a monthly basis, prices rose 0.3 per cent, compared to May’s 0.1 per cent uptick, aligning with forecasts.

When stripping out volatile food and energy costs, “core” CPI rose 2.9 per cent over the past year, slightly higher than May’s 2.8 per cent.

Monthly core prices increased 0.2 per cent, up from 0.1 per cent the previous month.

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Economists had anticipated the core CPI to hit 2.9 per cent annually and 0.3 per cent monthly.

The report comes amid escalating trade tensions, with Trump announcing tariffs of 20 to 50 per cent on over 20 countries, including 35 per cent on Canadian goods and 30 per cent on imports from Mexico and the European Union.

He’s also proposed broad tariffs of 15 to 20 per cent on most trading partners.

The EU is now racing to negotiate while bracing for possible retaliation.

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These trade disputes are clouding the Federal Reserve’s plans for interest rate cuts. Markets expect the Fed to hold rates steady at its next meeting in two weeks, with uncertainty about tariffs’ impact on prices.

The chance of a September rate cut dipped just below 60 per cent after the report.

While June’s inflation remained moderate, there are hints that tariffs may be starting to hit consumers’ pockets. Core inflation has stayed high due to persistent costs for housing and services like insurance and medical care, though a slight easing in shelter costs softened the monthly reading.

The shelter index rose 3.8 per cent annually and 0.2 per cent monthly, down from May’s 3.9 per cent yearly and 0.3 per cent monthly gains.

Shelter was still the biggest driver of the monthly price increase, as per the BLS.

Rent and owners’ equivalent rent (the hypothetical rent a homeowner would pay for their property) each rose 0.2 per cent and 0.3 per cent month-over-month, respectively.

Meanwhile, lodging away from home dropped 2.9 per cent in June, following a 0.1 per cent decline in May.

Beyond shelter, lower monthly core inflation was helped by falling prices in categories like airline fares, used cars and trucks, and new vehicles. Food prices, however, remained sticky, with the index up 0.3 per cent for the second month in a row.