Get exclusive access to the White House Watch newsletter at no cost
Discover the implications of Trump’s second term on Washington, business, and the global landscape
The US inflation rate rose to 2.7% in June, exceeding expectations and indicating that Donald Trump’s tariffs are impacting prices.
The annual consumer price index for Tuesday showed an increase from 2.4% in May, surpassing the 2.6% forecasted by analysts surveyed by Bloomberg.
This data from the Bureau of Labor Statistics comes as President Trump escalates his tariff disputes with trading partners, threatening to impose significant levies on importers if trade deals are not reached.
“Today’s report highlights the impact of tariffs,” stated Omair Sharif of Inflation Insights.
Since taking office, Trump has implemented various tariffs, with a base rate of 10% and sector-specific levies. He postponed the imposition of higher reciprocal duties until August 1.
“The effects of tariffs are starting to manifest in inflation, although still moderately, indicating that businesses have absorbed a considerable portion of the impact,” said Eswar Prasad, an economics professor at Cornell University.
He added, “This situation may not be sustainable, especially if Trump follows through with his recent tariff threats.”
The rise in June’s inflation was partly driven by increased food prices, offset by lower commodity prices.
Core inflation, excluding volatile food and energy prices, increased by 2.9%, aligning with expectations. However, analysts noted that the core figure was influenced by a weak second-hand car market.
Following the release of the data, futures market traders slightly increased their expectations for interest rate cuts but still anticipate two reductions by the end of the year.
Longer-term Treasury yields, influenced by inflation projections, declined, while US stocks rose, briefly reaching new record levels. The dollar remained relatively stable.
“The market is relieved that the numbers weren’t worse,” said Andy Brenner, head of international fixed income at NatAlliance Securities.
He noted concerns of a worse outcome following US Treasury Secretary Scott Bessent’s caution against overemphasizing a single month’s figure in a Bloomberg interview.
Lou Brien, market strategist at DRW Trading, observed a “subdued” market response to Tuesday’s figures but emphasized the potential lurking inflation risks.
President Trump has urged Federal Reserve Chair Jay Powell to slash interest rates by up to 3 percentage points to reduce the country’s debt burden.
However, most members of the Fed’s rate-setting committee prefer to wait for clearer insights into the inflationary effects of tariffs before considering any rate cuts. Two members have suggested openness to a cut as early as this month.