Inflation on the Rise
Inflation picked up steam last month amid early signs that President Trump’s tariffs are beginning to have an effect on the prices shoppers see in stores. Consumer prices in June were up 2.7% from a year ago, according to a report from the Labor Department. That’s a larger annual increase than the month before.
What’s Driving Inflation?
Prices rose 0.3% between May and June, also a sharper increase than the previous month. Rising rents were the main driver of inflation in June. But the price of clothing, appliances, and toys also jumped — which likely reflects the effects of import taxes. Clothing prices rose 0.4% while the price of appliances and toys jumped nearly 2%.
Impact of Tariffs
The president has imposed tariffs of at least 10% on nearly everything the U.S. imports, with higher taxes on goods from China. The government collected $27 billion from tariffs in June — a four-fold increase from the same month a year ago. Energy and food costs were also higher in June, while the price of new and used cars and airline tickets was down.
Fed Likely to Hold Rates
The average tariff on imported goods is now the highest it’s been since the Great Depression. And Trump has threatened to impose even higher taxes on goods from many countries, beginning on August 1. Falling energy costs had helped to keep overall inflation in check in recent months. But gasoline prices rebounded in June. And electricity costs jumped by 1%, as hot summer weather kept air conditioners busy.
Federal Reserve Under Pressure
The uptick in inflation last month cements expectations that the Federal Reserve will hold interest rates steady when policymakers meet later this month, despite mounting pressure from the White House for lower rates. President Trump has frequently attacked Fed chairman Jerome Powell and his colleagues for not cutting rates more aggressively.
Conclusion
In conclusion, inflation is on the rise, driven by increasing prices of clothing, appliances, and toys, as well as rising rents and energy costs. The impact of tariffs is beginning to be felt by shoppers, and the Federal Reserve is likely to hold interest rates steady despite pressure from the White House. Investors still think a rate cut is likely in September, but for now, it seems that inflation will continue to rise.
