Subscribe
Subscribe Now to receive Goldsea updates!
- Subscribe for updates on Goldsea: Asian American Supersite
Consumer Prices Jumped in June on Tariffs Despite Flat Service Prices
By Reuters | 15 Jul, 2025
The impact of tariffs on various consumer goods caused the CPI to increase at the highest rate in five months despite flat or lower costs for services.
U.S. consumer prices increased by the most in five months in June amid higher costs for some goods, suggesting tariffs were starting to have an impact on inflation and potentially keeping the Federal Reserve on the sidelines until September.
Despite the pick-up in the Consumer Price Index reported by the Labor Department on Tuesday, underlying inflation remained moderate last month, with prices for new and used motor vehicles lower relative to May.
Services like airline fares as well as hotel and motel rooms were also cheaper in June. Softening demand as consumers hunker down is limiting price increases for these services, a trend that, if sustained, could ease concerns of a broad-based rise in inflationary pressures.
"While today's CPI release showed some early signs of tariff impact, on the whole underlying inflation remained muted," said Kay Haigh, global co-head of fixed income and liquidity solutions at Goldman Sachs Asset Management. "Price pressures, however, are expected to strengthen over the summer and the July and August CPI reports will be important hurdles to clear. For the time being the Fed remains in wait-and-see mode."
The CPI increased 0.3% last month after edging up 0.1% in May, the Labor Department's Bureau of Labor Statistics said. That gain was the largest since January, and also reflected higher rental costs. Gasoline prices rebounded 1.0% after four straight monthly declines.
Food prices rose 0.3%, matching the increase in May. Grocery store prices also advanced 0.3%, lifted by a 1.4% increase in the costs of nonalcoholic beverages and 2.2% jump in coffee prices. Fruits and vegetables cost 0.9% more while beef prices jumped 2.0%. But eggs were 7.4% cheaper as an avian flu outbreak abated. The cost of food consumed away from home rose 0.4%.
In the 12 months through June, the CPI advanced 2.7% after rising 2.4% in May. Economists polled by Reuters had forecast the CPI would climb 0.3% and rise 2.6% on a year-over-year basis.
The Fed tracks different inflation measures for its 2% target. The central bank is expected to leave its benchmark overnight interest rate in the 4.25%-4.50% range at a policy meeting later this month.
Minutes of the central bank's June 17-18 meeting, which were published last week, showed only "a couple" of officials said they felt rates could fall as soon as the July 29-30 meeting.
The dollar was little changed against a basket of currencies. U.S. Treasury yields were mixed.
HIGHER TARIFFS
CPI inflation readings came in on the low side in February through May, leading to demands by President Donald Trump for the U.S. central bank to lower borrowing costs. Economists said inflation has been slow to respond to the sweeping import duties Trump announced in April because businesses were still selling stock accumulated before the tariffs came into effect.
Trump last week announced higher tariffs would come into effect on August 1 for imports from a range of countries, including Mexico, Japan, Canada and Brazil, and the European Union, raising the effective tariffs rate.
Economists expect higher goods prices to prevail through the summer. Excluding the volatile food and energy components, the CPI rose 0.2% in June after edging up 0.1% in the prior month. In the 12 months through June, the so-called core CPI inflation increased 2.9% after rising by 2.8% for three straight months.
Household furnishings and supplies prices shot up 1.0% after climbing 0.3% in May. Prices for appliances surged 1.9% while the cost of apparel rebounded 0.4%. Sporting goods prices accelerated 1.4% while toys vaulted 1.8%.
But they were partially offset by a 0.7% decline in the prices of used cars and trucks. New motor vehicle prices fell 0.3% for a second straight month. Core food prices rose 0.2% after being unchanged in May.
Owners' equivalent rent of primary residence rose 0.3%, but the cost of hotel and motel rooms declined 3.6%. Airline fares dipped 0.1%. The costs of services excluding energy services increased 0.3% after gaining 0.2% in May.
Goldman Sachs is forecasting monthly core CPI inflation increases of between 0.3%-0.4% over the next few months, reflecting tariff-related increases in the prices of consumer electronics, autos and apparel. The investment bank expects limited near-term impact on core services inflation.
(Reporting by Lucia Mutikani; Editing by Chizu Nomiyama and Paul Simao)
"Price pressures, however, are expected to strengthen over the summer and the July and August CPI reports will be important hurdles to clear. For the time being the Fed remains in wait-and-see mode."
Shoppers cross the intersection of Broadway and Spring Street in the SoHo neighborhood of New York City, U.S., September 21, 2023. REUTERS/Bing Guan/File Photo
Asian American Success Stories
- The 130 Most Inspiring Asian Americans of All Time
- 12 Most Brilliant Asian Americans
- Greatest Asian American War Heroes
- Asian American Digital Pioneers
- New Asian American Imagemakers
- Asian American Innovators
- The 20 Most Inspiring Asian Sports Stars
- 5 Most Daring Asian Americans
- Surprising Superstars
- TV’s Hottest Asians
- 100 Greatest Asian American Entrepreneurs
- Asian American Wonder Women
- Greatest Asian American Rags-to-Riches Stories
- Notable Asian American Professionals