Consumer prices in the US likely rose in June, which may indicate the beginning of the long-awaited inflation increase caused by tariffs. This is causing the Federal Reserve (Fed) to approach potential interest rate cuts cautiously.
The Tuesday report from the US Department of Labor is expected to show a rebound in gasoline prices and rising costs of some tariff-sensitive goods. Inflation figures from February through May remained low, prompting President Donald Trump to urge the Fed to lower borrowing costs.
However, retailers, including Walmart, warn of rising prices. Economists expect inflationary pressures to intensify from early summer and continue through the end of the year, as businesses have still been selling inventory stocked before the tariffs were implemented.
Last week, Trump announced tariff increases effective August 1 on imports from Mexico, Japan, Canada, Brazil, and the EU.
The Consumer Price Index (CPI) is forecast to rise 0.3% in June after a 0.1% gain in May — the biggest monthly increase since January. Gasoline prices are likely to recover after four months of decline. A slight rise in food prices is also expected, partly due to falling egg prices after the bird flu decline.
Inflation on a yearly basis to June is projected at 2.7%, up from 2.4% in May.
Core inflation is also accelerating.
Excluding food and energy, the core CPI may increase by 0.3%, marking the highest monthly rise since January. Price increases are expected in tariffed goods, including furniture and leisure products.
Economist Stephen Stanley said tariff effects began showing in June, with their main impact expected in July and August.
At the same time, rising prices for goods are partially offset by weak price growth in services due to low demand (airfare, hotels).
Core inflation rose 3.0% year-on-year to June after three months of 2.8% gains.
The Fed monitors various inflation measures to maintain its 2% target. The rate is expected to remain in the 4.25–4.50% range after this month’s meeting. Minutes from the last meeting show only a “few” officials see a rate cut possibility as early as July.
Citigroup economists believe moderate inflation in the services sector provides grounds for optimism, allowing the Fed to cut rates in September, even if inflation data in the coming months is stronger.
Goldman Sachs forecasts monthly core CPI growth of 0.3–0.4% in coming months, reflecting tariff impacts on electronics, cars, and clothing. Inflation effects in services are expected to be moderate.