The US Labor Department stated on Tuesday (July 15) that consumer prices in June rose by 2.7% compared to the same period last year, higher than the 2.4% annual increase in May. On a monthly basis, prices in June increased by 0.3% compared to May, while the previous month saw a slight increase of only 0.1%. Core inflation also rose by 0.2% compared to May.
After excluding the more volatile categories of food and energy, the core inflation rate in June increased by 2.9% compared to the same period last year, surpassing May’s 2.8% increase.
The increase in inflation rates may prompt the Federal Reserve to maintain interest rates at the upcoming meeting in two weeks.
President Trump has consistently denied the existence of inflation in the United States and has been urging the Federal Reserve to lower short-term rates. Federal Reserve Chairman Jerome Powell has expressed a desire to first observe the economic impact of Trump’s tariff policies before considering lowering borrowing costs.
The White House has rejected claims that tariffs have led to inflation, pointing out that despite imposing a 25% tariff on cars and a 50% tariff on steel and aluminum, new car prices have still decreased. The White House also noted that while clothing prices rose in June, they are still lower than they were three months ago.
On the social media platform “Truth Social,” Trump posted that “Consumer Prices LOW,” and called for the Federal Reserve to immediately lower interest rates.
Chief economist Eric Winograd of asset management company AllianceBernstein believes that the inflationary effects of tariff policies are gradually becoming evident. He pointed out that housing costs, a major driver of inflation, have been cooling since the pandemic began, curbing overall inflation. Rent prices rose by 3.8% in June, marking the smallest annual increase since late 2021. Winograd also commented that if not for the uncertainty surrounding tariffs, the Federal Reserve would have already started cutting rates. However, both the Fed and most economists believe that there are other factors at play.
Powell stated in a press conference last December that businesses along the entire price chain will try to avoid paying tariffs, but ultimately some businesses and consumers will share the costs. He acknowledged the unpredictability of this process, emphasizing that the situation is unprecedented.
Democrats fear that with Trump’s recent tariff announcements, the situation could become even more severe.
Currently, President Trump has imposed a 10% tariff on all imports and a 30% tariff on goods from China. He has also announced plans to impose a 30% tariff on the EU and a 50% tariff on Brazil starting from August 1.
Meanwhile, Treasury Secretary Benson announced that the “formal process” to select Jerome Powell’s successor as Federal Reserve Chairman is underway, adding that there are many excellent candidates under consideration. Trump has publicly stated multiple times that he hopes the next Fed Chairman will support rate cuts, criticizing Powell for maintaining interest rates unchanged since last year’s rate cut.
(Reference: Associated Press)